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Barclays Bank PLC Annual Report 2009barclays.com/annualreport09

About Barclays

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02 Key performance indicators

06 Financial review

18 Directors’ report

21 Independent Auditors’ report

22 Consolidated accounts

Contents

In this document the terms ‘Bank’and ‘Company’ refer to BarclaysBank PLC and the terms ‘Barclays’and ‘Group’ refer to Barclays BankPLC and its subsidiaries.

The information in the notes tothe accounts relates to the Groupunless stated otherwise.

Registered and Head office:1 Churchill PlaceLondon E14 5HPTel: +44 (0)20 7116 1000

02 Barclays Bank PLC Annual Report 2009 www.barclays.com/annualreport09

Key performance indicators

Financial KPIs

Definition

Profit before taxProfit before tax is one of the two primaryprofitability measures used to assessperformance and represents total income lessimpairment charges and operating expenses.

Economic profitEconomic Profit (EP) is the other primary profitability measure used by Barclays. EP isprofit after tax and non-controlling interests lessa capital charge (average shareholders’ equity and goodwill excluding non-controlling interestsmultiplied by the Group’s cost of equity).

Capital ratiosCapital requirements are part of the regulatoryframework governing how banks and depository institutions are managed. Capitalratios express a bank's capital as a percentage of its risk weighted assets. Both Tier 1 and CoreTier 1 capital resources are defined by the UKFSA. Core Tier 1 is broadly tangible shareholders'funds less the capital deductions from Tier 1.In the 2008 accounts, we showed Equity Tier 1ratio which was broadly representative of theCore Tier 1 ratio. In 2009, the UK FSA formalised adefinition for Core Tier 1 which is now publishedconsistently by the industry in the UK.

Adjusted Gross LeverageAdjusted gross leverage is defined as themultiple of adjusted total tangible assets overtotal qualifying Tier 1 capital. Adjusted totaltangible assets are total assets less derivativecounterparty netting, assets under managementon the balance sheet, settlement balances,goodwill and intangible assets. Tier 1 capital isdefined by the UK FSA.

Loan Funding RatioThis is the ratio of customer loans to deposits andlong term funding. It represents the Group’saccess to high quality and stable funding sourcesto fund customer assets. The ratio is calculated bydividing customer loans by customer depositsplus greater than 1 year funding (in each case,excluding Absa).

Why it’s important to the business and management

Profit before tax is a key indicator of financial performance to many of our stakeholders.Excluding movement on own credit, gains on acquisitions anddisposals and gains on debt buy-backs, Group profit beforetax increased 250% to £5,608m from £1,601m.Total Group profit before tax is represented here alongsideprofit before tax from continuing operations to aidcomparison.

Barclays believes that economic profit encourages bothprofitable growth and the efficient use of capital.

The Group’s capital management activities seek to maximiseshareholders’ value by optimising the level and mix of itscapital resources.The Group’s capital management objectives are to:– Maintain sufficient capital resources to meet the minimum

regulatory capital requirements set by the UK FSA and theUS requirements that a financial holding company be ‘well capitalised’

– Maintain sufficient capital resources to support the Group’sRisk Appetite and economic capital requirements

– Support the Group’s credit rating– Ensure locally regulated subsidiaries can meet their

minimum capital requirements– Allocate capital to businesses to support the Group’s

strategic objectives, including optimising returns oneconomic and regulatory capital.

We expect to maintain our Core Tier 1 and Tier 1 ratios atlevels which significantly exceed the current minimumrequirements of the UK FSA.

Barclays believes that there will be more capital and lessleverage in the banking system and that lower leverage will be regarded as a key measure of stability going forward. This is consistent with the views of our regulators and investors.

International regulators have considered the imposition of abackstop core funding ratio as a means of limiting liquidity risk toindividual banks and to the financial system as a whole. We haveno clear guidance on whether such a ratio will be developed in theUK. The Barclays Liquidity Risk Framework already limits theGroup's reliance on less stable sources of funding and we use theratio to monitor wholesale refinancing risk and to ensure thatshort term wholesale financing is not used to fund core customerassets. Comparative data for 2007 is unavailable as the Group hasonly formally measured this ratio since 2008.

2007 2008 2009

Core Tier 14.5% 5.6% 10.1%

Tier 17.3% 8.6% 13.0%

2007 2008 2009

33x 28x 20x

Total profit before tax2007 2008 2009

£7,107m £6,035m £11,616m

Profit before tax from continuing operations

2007 2008 2009

£6,254m £5,094m £4,559m

£4,8

75m

£1,7

60m

£2,2

90m

07 08 09

NoteLoan funding ratio and average term of unsecured liabilities have been introduced as monitors of the Group’s funding model.

81%

93%

08 09

www.barclays.com/annualreport09 Barclays Bank PLC Annual Report 2009 03

Financial KPIs continued

Definition

Average Term of Unsecured LiabilitiesThis is calculated as the term of outstandingwholesale borrowing (excluding subordinateddebt and excluding Absa, which has countryspecific funding dynamics that differ from the restof the Group), after removing the short termdeposits that are directly invested in the liquiditypool. The longer the average term the lower theaggregate refinancing risk in wholesale markets.


The extension of the term of our wholesale financing has meantthat, as at 31st December 2009, over 81% of net wholesalefunding has remaining maturity greater than 1 year and, as at thesame date, there was no net wholesale unsecured re-financingrequired within 6 months. This improvement in the term ofwholesale funding has meant that Barclays has no reliance onshort term wholesale funding markets and consequently hasgreatly increased the Bank’s resilience to any future liquidity stressevent. Comparative data for 2007 is unavailable as the Group hasonly formally measured the average term of its unsecuredliabilities since 2008.

2007 2008 2009

14% 10% (8)%

– UK– Non-UK

10.1

m

7.7m

10.8

m

10.4

m11.6

m

11.7

m

07 08 09

Strategic KPIs: Build the best bank

Definition

UK Retail Banking Customer SatisfactionThe Retail Banking Service Monitor trackssatisfaction amongst Barclays customers.Approximately 10,000 customers a month areresearched for this study. The satisfaction scoreis measured using the percentage of customerswho state they are ‘Very’ or ‘Completely’satisfied with Barclays. We also benchmark our performance in comparison withcompetitors using syndicated or directlycommissioned research.

Net lending in Barclays Commercial BankNet lending represents the change in our loansand advances to customers during the year.

Barclaycard International – number of customersThe total number of customers split between UK and non-UK.


Putting the customer first and improving customer service isfundamental to our goal of being the UK’s best bank. Customersatisfaction targets are set at a strategic business unit level and business area action plans are developed through thecontinuous tracking of customer satisfaction and complaintsfeedback. Since June 2008 customer satisfaction and advocacy have been on an increasing trend as a result ofsignificant improvements to our service and innovations in our product offerings.

Building the best bank means we are there for our customers.We have supported our customers through the recession via campaigns such as ‘Turning the Corner’ which has been awarded ‘Best Customer Relationship Initiative’ in the B2B Marketing Awards. The campaign offers online expertadvice, insight and networking events to connect ourcustomers, attracting over 70,000 hits on our website and over 3,700 people attending connect events. Although we have experienced a fall in customer demand, we continue to be committed to lend to viable businessesacross all portfolios, demonstrated through £14bn of new term lending and our stable approval rates on new credit applications.

Barclaycard is one of Europe’s largest multi-branded credit card businesses, with a fast growing business in the UnitedStates and South Africa. In 2003 we targeted growingBarclaycard’s international operations to the same scale as its UK business over ten years. This KPI demonstrates how this target is being balanced and maintained.

07 08 09

72%

64%

67%

08 09

26 months

14 months

UK Retail Banking Cost:Income Ratio is included within the cost management strategic KPI


Key performance indicatorscontinued

Strategic KPIs: Develop Retail and Commercial Banking activities in selected countries outside the UK

Definition

Number of distribution outlets outside the UKRepresents total number of branches and salescentres outside the UK.

Proportion of Global Retail and CommercialBanking international incomePercentage of total Global Retail and CommercialBanking income earned outside the UK.


This represents the growth in our footprint around the world,providing a clear indication of the development of our activitiesoutside the UK.The addition of new distribution outlets drivesthe increase in customer numbers.Sales centres are a low cost option for testing demand forbanking services in small towns and remote areas, and alsoaugment branch distribution in larger cities. These sites arereviewed periodically to assess benefits to customers and thefranchise as a whole. In 2009, the number of sales centres inEmerging Markets were reduced as the demand for productsand services in these areas did not require the presence ofdedicated distribution outlets.As sales centres do not offer transaction services there islimited impact on customer service, whereas new customersor prospects can be served from the nearest Barclays branch.

This demonstrates the successful execution on Barclaysstrategy of diversifying our business base by geography over time to achieve higher growth.

2007 2008 2009

2,349 3,158 3,063

Strategic KPIs: Enhance operational excellence

Definition

Risk managementLoan loss rateThe loan loss rate represents the impairment charge on loans and advances as a proportion of the period and balances.


The granting of credit is one of Barclays major sources ofincome and its most significant risk. The loan loss rate is anindicator of the cost of granting credit.

07 08 09

45%

32%

38%

Strategic KPIs: Build the best bank continued

1.56

%

0.95

%

0.71

%07 08 09

Definition

International generation of incomePercentage of total income net of insuranceclaims and benefits generated outside of the UK.


The goal of increasing the international diversification of our income helps to reduce risk and is demonstrated by ourcontinuing focus to increase the ratio of non-UK to UKbusinesses.

07 08 09

57%

43%47%


Sustainability

Definition

Global investment in our communitiesBarclays total contribution to supporting thecommunities where we operate.


Investing in the communities in which we operate is an integralpart of Barclays sustainability strategy. We are committed tomaintaining investment in our communities for the long-term– both in good times and in bad. This metric demonstrates our commitment over time.

Our People

Definition

Colleagues involved in volunteering,regular giving and fundraising initiativesThe total number of Barclays employees takingpart in volunteering, giving and fundraisingactivities with Barclays support.

Employee opinion survey for Global Retailand Commercial Banking and Group CentreA survey of employees, the results of which givedemographic and diversity information as wellas an indication of employee perceptions in fourkey areas: Barclays Top Leadership, BusinessUnit Leadership, Customer Focus and EmployeeEngagement. The results are analysed to showyear on year trends of employee opinion and are benchmarked against other global financialservices organisations and high performingorganisations.


Barclays community investment programme aims to engageand support colleagues around the world to get involved withour main partnerships, as well as the local causes they careabout. Harnessing their energy, time and skills delivers realbenefit to local communities, to their own personaldevelopment and to their engagement with Barclays.

The results of the survey provide leaders with insight intoemployee views on key business drivers from which they can establish action plans for improvements based on bothstrengths and weaknesses identified.

£54.

9m

£52.

2m

£52.

4m07 08 09

2007 2008 2009

44,000 57,000 58,000

— Employee engagement — Response rate

07 08 09

91%

75%

90% 91%

74%76%

Strategic KPIs: Enhance operational excellence continued

Definition

Cost managementcost:income ratio by business – productivity benchmarkingCost:income ratio is defined as operatingexpenses compared to total income net ofinsurance claims. This is compared to a peer setwe consider relevant for each business.


This is a measure management use to assess the productivity ofthe business operations. We target a top quartile cost:incomeratio of each of our businesses relative to their peers.

50

56 61

40 39 37

27

44

37 37

66 65

49 49 50

67

134

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a Peers include related credit card businessb Absa Group Limitedc Cost:net incomeGRCB – Emerging Markets is not disclosed as there is not an appropriate peer group for comparison.

%— H109 Peer Group Top Quartile CIR — FY08 Barclays Business CIR— FY09 Barclays Business CIR


Financial reviewIncome statement commentary

Barclays delivered net profit for the year of £10,289m in 2009, an increase of96% on 2008. This included the BGI gain on sale of £6,331m before tax, andwas achieved after absorbing: £6,086m in writedowns on credit marketexposures (including impairment of £1,669m), other Group impairment of£6,402m and a charge of £1,820m relating to the tightening of own creditspreads. Profit included £1,255m of gains on debt buy-backs andextinguishment.

Total income grew 34% to £30,957m, and income from continuingoperations grew 40% to £29,925m, with particularly strong growth inBarclays Capital. Within Global Retail and Commercial Banking (GRCB),Barclaycard and GRCB – Western Europe also reported good income growth.The aggregate revenue performance of GRCB businesses was, however,affected by the impact of margin compression on deposit income as a resultof the very low absolute levels of interest rates. Barclays Capital income wasup 122% compared to 2008. Top-line income rose by £8,004m reflectingthe successful integration of the acquired Lehman Brothers North Americanbusinesses, buoyant market conditions observed across most financialmarkets in the first half of 2009 and a good relative performance in thesecond half of 2009 despite weaker markets. Income in Barclays Capital wasimpacted by writedowns of £4,417m (2008: £6,290m) relating to credit

market exposures held in its trading books and by a charge of £1,820m(2008: gain of £1,663m) relating to own credit.

Impairment charges against loans and advances, available for saleassets and reverse repurchase agreements increased 49% to £8,071m,reflecting deteriorating economic conditions, portfolio maturation andcurrency movements. The impairment charge against credit marketexposures included within this total reduced 5% to £1,669m. Impairmentcharges as a percentage of Group loans and advances as at 31st December2009 increased to 156bps from 95bps, or 135bps on constant 2008 yearend balance sheet amounts and average foreign exchange rates.

Total operating expenses increased 24% to £17,849m, but by 10% lessthan the rate of increase in Group total income. Operating expenses fromcontinuing operations increased 25% to £16,712m. Expenses in GRCB werewell controlled, with the cost:income ratio improving from 53% to 52%.Operating expenses in Barclays Capital increased by £2,818m to £6,592mreflecting the inclusion of the acquired Lehman Brothers North Americanbusinesses. The Group total cost:income ratio improved from 62% to 58%(57% on a continuing basis). At Barclays Capital the compensation:incomeratio improved from 44% to 38%.


Financial reviewAnalysis of results by business

Business Performance – Global Retail and Commercial BankingUK Retail Banking profit before tax decreased 55% to £612m as economicconditions remained challenging. Income was down 11% reflecting theimpact of deposit margin compression net of hedges, partially offset bygood growth in Home Finance. Total loans and advances to customersincreased £4.7bn to £99.1bn. Gross new mortgage lending was £14.2bnduring 2009 and net new mortgage lending was £5.7bn. The average loanto value ratio of the mortgage book remained conservative at 43%.Impairment charges increased 55% due to the deteriorating economicenvironment. Operating expenses continued to be tightly controlled anddecreased 3% reflecting a one-off credit from the closure of the UK finalsalary pension scheme offset by a year on year increase in pension costs andthe non-recurrence of gains from the sale of property.

Barclays Commercial Bank profit before tax decreased 41% to £749m.Income was broadly flat on 2008 with good growth in net fees andcommissions offset by lower income from principal transactions. Netinterest income was broadly flat as margin compression on the deposit bookwas offset by higher lending and deposit volumes. New term lendingextended to UK customers during 2009 was £14bn. Operating expenseswere tightly controlled and fell 3% driven by a one-off credit from the closureof the UK final salary pension scheme partially offset by an increase inpensions and share-based payment costs and the non-recurrence of gainsfrom the sale of property. Impairment charges increased to £974mreflecting the impact of the weak business environment with rising defaultrates and falling asset values across all business segments.

Barclaycard profit before tax decreased 4% to £761m. Income growthof 26% reflected strong growth across the businesses driven by increasedlending and improved margins. Average customer assets increased 19% to£28.1bn. Impairment charges increased 64% due to the deteriorating globaleconomic environment, although the rate of growth in the second half of theyear was lower than in the first half. Impairment grew across both theinternational and UK businesses. Cost growth of 5% was largely driven byappreciation of the average value of the US Dollar and the Euro against Sterlingand growth in the card portfolios including acquisitions made in 2008.

Global Retail and Commercial Banking – Western Europe profit beforetax fell 48% to £130m. Results included Barclays Russia, which incurred aloss of £67m and reflected a gain of £157m on the sale of Barclays lifeinsurance and pensions business in Iberia. Income grew in all countries,improving 18% as the expanded network continued to mature withcustomer deposits increasing £7.8bn to £23.4bn. Costs increased 16%reflecting the expansion of the Portuguese and Italian networks, the additionof Barclays Russia, restructuring charges of £24m and reduced gains fromthe sale of property. Impairment charges increased £370m to £667m,largely driven by losses in Spain in commercial property, construction andSME portfolios. However, delinquency trends improved throughout thesecond half of 2009 in both retail and commercial portfolios.

Global Retail and Commercial Banking – Emerging Markets loss beforetax of £254m compared to a profit of £141m in 2008. Income increased 5%with significant growth across Africa and the UAE, partially offset by lower

income in India. Impairment charges increased £306m to £471m withsignificant increases in India and the UAE, reflecting the impact of theeconomic recession across the business with continued pressure onliquidity, rising default rates and lower asset values. Operating expensegrowth of 24% reflected continued investment in Indonesia and Pakistanand investment in infrastructure across other markets.

Global Retail and Commercial Banking – Absa profit before taxdecreased 8% to £506m. Income growth of 16% was driven by solidbalance sheet growth, the appreciation in the average value of the Randagainst Sterling and higher fees and commissions. Operating expensesincreased at a lower rate of 13% which led to an improvement in thecost:income ratio to 58% (2008: 59%). Impairment charges rose £220m to£567m as a result of higher delinquency levels in the retail portfoliosreflecting high consumer indebtedness.

Business Performance – Investment Banking and Investment Management Barclays Capital profit before tax increased 89% to £2,464m as a result ofvery strong performances in the UK, Europe and the US, partially offset by acharge of £1,820m relating to own credit (2008: £1,663m gain). Top-lineincome increased 81% to £17.9bn reflecting excellent results across theclient franchise and a resilient fourth quarter with top-line income of £3.6bn.Fixed Income, Currency and Commodities (FICC) was up £5.6bn to £13.0bnfollowing the expansion of the business and increased client flows. Top-lineincome in Equities and Prime Services increased 147% and InvestmentBanking income more than doubled. Total credit market exposures werereduced by £14.1bn to £27.6bn. In addition £5.1bn of credit market assets(and £2.4bn of other assets) were sold to Protium Finance LP. Operatingexpenses were 75% higher than 2008 given the substantial increase in theoverall scale of the business. The cost:income ratio improved to 57% (2008:72%). Compensation expenses as a proportion of income reduced 38%,down from 44% in 2008. Total assets reduced 37% driven by initiatives toreduce derivative balances.

On 1st December 2009 Barclays completed the sale of Barclays GlobalInvestors to BlackRock, Inc. Included in the consideration were 37.567million new BlackRock shares giving Barclays an economic interest of 19.9%of the enlarged BlackRock group. The profit on disposal before tax was£6,331m. Profit before tax, excluding the profit on disposal, increased 26%to £749m (2008: £595m) following a recovery on liquidity support chargesand an 18% appreciation in the average value of the US Dollar againstSterling.

Barclays Wealth profit before tax reduced 78% to £145m principally as aresult of the impact of the sale of the closed life business in 2008 and thecost of the integration of Barclays Wealth Americas during 2009. Incomewas in line with 2008. Excluding the impact of these transactions there wassolid growth in income due to growth in the client franchise and the productoffering. Operating expenses grew by 22%, reflecting the integration of theUS business, partially offset by the disposal of the closed life business. Totalclient assets increased by 4% (£6bn) to £151bn.


Financial reviewBalance Sheet and Capital Management

Shareholders’ EquityShareholders’ equity, excluding non-controlling interests, increased 35% to£55.9bn in 2009 driven by profit after tax of £10.3bn. Net tangible assetvalue increased by 53% to £47.1bn.

Balance SheetTotal assets decreased by £674bn to £1,379bn in 2009, primarily reflectingmovements in market rates and active reductions in derivative balances.

Balances attributable to derivative assets and liabilities would have been£374bn lower (31st December 2008: £917bn lower) than reported underIFRS if netting were permitted for assets and liabilities with the samecounterparty or for which we hold cash collateral.

Excluding this, assets and liabilities held under investment contracts,settlement balances, goodwill and intangible assets, our adjusted totaltangible assets were £969bn at 31st December 2009 (31st December2008: £1,027bn). On this basis, we calculate adjusted gross leverage, beingthe multiple of adjusted total tangible assets over total qualifying Tier 1capital, as 20x as at 31st December (31st December 2008: 28x).

Assets and risk weighted assets were affected by the depreciation invalue of various currencies relative to Sterling during 2009. As at 31st December 2009, the US Dollar and the Euro had depreciated 10% and 7%, respectively, relative to Sterling.

Capital ManagementAt 31st December 2009, on a Basel II basis, our Core Tier 1 ratio was 10.1% (31st December 2008: 5.6%) and our Tier 1 ratio was 13.0% (31st December 2008: 8.6%). Capital ratios reflect a 12% decrease (£51bn)in risk weighted assets to £383bn in 2009. Key drivers included a reductionin the overall size of the balance sheet and foreign exchange movements.

LiquidityThe liquidity pool held by the Group increased to £127bn at 31st December2009 from £43bn at the end of 2008. Whilst funding markets were difficult,particularly in the first half of 2009, we were able to increase availableliquidity and we extended the average term of unsecured liabilities from14 months to 26 months. We issued £15bn equivalent in public seniorunguaranteed debt markets, across multiple currencies and maturities.In addition, we raised £1.8bn equivalent in the covered bond market andissued £21bn equivalent of structured notes. We have continued to manageliquidity prudently in the light of market conditions and in anticipation ofongoing regulatory developments.

Foreign Currency TranslationDuring 2009, US Dollar and Euro depreciated 10% and 7%, respectively,relative to Sterling. As a result, foreign currency assets and risk weightedassets decreased in value in Sterling terms.

The Group’s hedging strategy in respect of net investments in foreigncurrencies is designed to minimise the volatility of the capital ratios causedby changes in the Sterling value of foreign currency capital resources andrisk weighted assets due to movements in foreign currency exchange rates.In this regard, the Group’s 31st December 2009 Core Tier 1 ratio is hedgedto approximately 75%, 25% and 80% of the movements in US Dollar, Euroand South African Rand respectively against Sterling.

The currency translation reserve reduced by £1.2bn in 2009. Thisreflected movements in foreign currency net investments which are partiallyeconomically hedged through preference share capital (denominated inUS Dollars and Euros) that is not revalued for accounting purposes.


Risk managementRisk factors

The following information sets forth the risk factors which the Groupbelieves could cause its future results to differ materially from expectedresults. However, other factors could also adversely affect the Group’sresults and so the factors discussed in this report should not beconsidered to be a complete set of all potential risks and uncertainties.

The Group’s approach to identifying, assessing, managing and reportingrisks is formalised in its Principal Risk framework, and definitions of the 13Principal Risks are given below.

This summary of risk factors also includes a discussion of the impact ofbusiness conditions and the general economy, which are not Principal Risksbut can impact risk factors such as credit and market risk and so influencethe Group’s results.

Business conditions and general economyBarclays operates a universal banking business model and its services rangefrom current accounts for personal customers to inflation-risk hedging forgovernments and institutions. The Group also has significant activities in alarge number of countries. There are, therefore, many ways in whichchanges in business conditions and the general economy can adverselyimpact Barclays profitability, be they at the level of the Group, the individualbusiness units or the specific countries in which we operate.

The Group’s stress testing framework helps it understand the impact ofchanges in business conditions and the general economy, as well as thesensitivity of its business goals to such changes and the scope ofmanagement actions to mitigate their impact.

As the current downturn has shown, higher unemployment in the UK,US, Spain and South Africa has led to increased arrears in our credit cardportfolios, while falls in GDP have reduced the credit quality of the Group’scorporate portfolios. In both cases, there is an increased risk that a higherproportion of the Group’s customers and counterparties may be unable tomeet their obligations. In addition, declines in residential and commercialproperty prices have reduced the value of collateral and caused mark tomarket losses in some of the Group’s trading portfolios.

The business conditions facing the Group in 2010 are subject tosignificant uncertainties, most notably:

– the extent and sustainability of economic recovery and asset prices inthe UK, US, Spain and South Africa as governments consider how andwhen to withdraw stimulus packages;

– the dynamics of unemployment in those markets and the impact ondelinquency and charge-off rates;

– the speed and extent of possible rises in interest rates in the UK, US andeurozone;

– the possibility of further falls in residential property prices in the UK,South Africa and Spain;

– the potential for single name risk and for idiosyncratic losses in differentsectors and geographies where credit positions are sensitive toeconomic downturn;

– possible additional deterioration in our remaining credit marketexposures, including commercial real estate and leveraged finance;

– the potential impact of deteriorating sovereign credit quality;

– changes in the value of Sterling relative to other currencies, which couldincrease risk weighted assets and therefore raise the capitalrequirements of the Group; and

– the liquidity and volatility of capital markets and investors’ appetite forrisk, which could lead to a decline in the income that the Group receivesfrom fees and commissions.

Principal Risk FactorsRetail and Wholesale Credit riskCredit risk is the risk of suffering financial loss, should any of the Group’scustomers, clients or market counterparties fail to fulfil their contractualobligations to the Group. The credit risk that the Group faces arises mainlyfrom wholesale and retail loans and advances. However, credit risk may alsoarise where the downgrading of an entity’s credit rating causes a fall in thefair value of the Group’s investment in that entity’s financial instruments.

In a recessionary environment, such as that recently seen in the UnitedKingdom, the United States and other economies, credit risk increases.Credit risk may also be manifested as country risk where difficulties mayarise in the country in which the exposure is domiciled, thus impeding orreducing the value of the assets, or where the counterparty may be thecountry itself.

Another form of credit risk is settlement risk, which is the possibility thatthe Group may pay funds away to a counterparty but fail to receive thecorresponding settlement in return. The Group is exposed to many differentindustries and counterparties in the normal course of its business, but itsexposure to counterparties in the financial services industry is particularlysignificant. This exposure can arise through trading, lending, deposit-taking,clearance and settlement and many other activities and relationships. Thesecounterparties include broker dealers, commercial banks, investment banks,mutual and hedge funds and other institutional clients. Many of these


Risk managementRisk factorscontinued

relationships expose the Group to credit risk in the event of default of acounterparty and to systemic risk affecting its counterparties. Where theGroup holds collateral against counterparty exposures, it may not be able torealise it or liquidate it at prices sufficient to cover the full exposures. Many ofthe hedging and other risk management strategies utilised by the Groupalso involve transactions with financial services counterparties. The failure ofthese counterparties to settle or the perceived weakness of thesecounterparties may impair the effectiveness of the Group’s hedging andother risk management strategies.

Market riskMarket risk is the risk that the Group’s earnings or capital, or its ability tomeet business objectives, will be adversely affected by changes in the levelor volatility of market rates or prices such as interest rates, credit spreads,commodity prices, equity prices and foreign exchange rates.

The majority of market risk exposure resides in Barclays Capital. Barclaysis also exposed to market risk through non-traded interest rate risk and thepension fund.

The Group’s future earnings could be affected by depressed assetvaluations resulting from deterioration in market conditions. Financialmarkets are sometimes subject to stress conditions where steep falls inasset values can occur, as demonstrated by events in 2007 and 2008affecting asset backed CDOs and the US sub-prime residential mortgagemarket and which may occur in other asset classes during an economicdownturn. Severe market events are difficult to predict and, if they continueto occur, could result in the Group incurring additional losses.

From the second half of 2007, the Group recorded material net losses oncertain credit market exposures, including ABS CDO Super Senior exposures.As market conditions change, the fair value of these exposures could fallfurther and result in additional losses or impairment charges, which couldhave a material adverse effect on the Group’s earnings. Such losses orimpairment charges could derive from: a decline in the value of exposures; adecline in the ability of counterparties, including monoline insurers, to meettheir obligations as they fall due; or the ineffectiveness of hedging and otherrisk management strategies in circumstances of severe stress.

Capital riskCapital risk is the risk that the Group has insufficient capital resources to:

– Meet minimum regulatory requirements in the UK and in otherjurisdictions such as the United States and South Africa where regulatedactivities are undertaken. The Group’s authority to operate as a bank isdependant upon the maintenance of adequate capital resources;

– Support its credit rating. A weaker credit rating would increase theGroup’s cost of funds;

– Support its growth and strategic options.

Regulators assess the Group’s capital position and target levels of capitalresources on an ongoing basis. Targets may increase in the future, and rulesdictating the measurement of capital may be adversely changed, whichwould constrain the Group’s planned activities and contribute to adverseimpacts on the Group’s earnings. During periods of market dislocation,increasing the Group’s capital resources in order to meet targets may provemore difficult or costly.

In December 2009 the Basel Committee on Banking Supervision issueda consultative document that outlined proposed changes to the definition of regulatory capital. These proposals are going through a period ofconsultation and are expected to be introduced by the beginning of 2013,with substantial transitional arrangements. While the proposals maysignificantly impact the capital resources and requirements of the Group,the Group maintains sufficient Balance Sheet flexibility to adapt accordingly.

Liquidity riskLiquidity risk is the risk that the Group is unable to meet its obligations asthey fall due as a result of a sudden, and potentially protracted, increase innet cash outflows. Such outflows would deplete available cash resources forclient lending, trading activities and investments. In extreme circumstances,lack of liquidity could result in reductions in balance sheet and sales ofassets, or potentially an inability to fulfil lending commitments. This risk isinherent in all banking operations and can be affected by a range ofinstitution-specific and market-wide events.


During periods of market dislocation the Group’s ability to manageliquidity requirements may be impacted by a reduction in the availability ofwholesale term funding as well as an increase in the cost of raisingwholesale funds. Asset sales, balance sheet reductions and the increasingcosts of raising funding may have a material effect on the earnings of theGroup.

In illiquid markets, the Group may decide to hold assets rather thansecuritising, syndicating or disposing of them. This could affect the Group’sability to originate new loans or support other customer transactions asboth capital and liquidity are consumed by existing or legacy assets.

The FSA issued its policy document on ‘strengthening liquiditystandards’ on 5th October detailing the requirements for liquiditygovernance to be in place by 1st December 2009, and the quantitativerequirements for liquidity buffers, which will be in place from 1st June 2010,although with an extended transition period of several years to meet theexpected standards.

In addition the Basel Committee on Banking Supervision released aconsultative document ‘International framework for liquidity riskmeasurement, standards and monitoring’ in December 2009. This includedtwo new key liquidity metrics. A Liquidity coverage ratio aimed at ensuringbanks have sufficient unencumbered high quality assets to meet cashoutflows in an acute short term stress and a Net Stable Funding Ratio topromote longer term structural funding of bank’s balance sheet and capitalmarket activities.

Operations riskOperations risk is the risk of losses from inadequate or failed internalprocesses and systems, caused by human error or external events.Operations risk has a broad scope and for that reason, the Group’s RiskControl Frameworks are defined at a more granular level within the overallOperations Principal Risk. These risks are transaction operations, newproduct development, premises, external suppliers, payments process andthe management of information, data quality and records.

Financial crime riskFinancial crime risk is the risk that the Group suffers losses as a result ofinternal and external fraud or intentional damage, loss or harm to people,premises or moveable assets.

Technology riskTechnology is a key business enabler and requires an appropriate level ofcontrol to ensure that the most significant technology risks are effectivelymanaged. Such risks include the non-availability of IT systems, inadequatedesign and testing of new and changed IT solutions and inadequate ITsystem security. Data privacy issues are covered under Regulatory Risk andexternal supplier issues relating to technology are covered under OperationsRisk

People riskPeople risk arises from failures of the Group to manage its key risks as anemployer, including lack of appropriate people resource, failure to manageperformance and reward, unauthorised or inappropriate employee activityand failure to comply with employment related requirements.

Regulatory riskRegulatory risk arises from a failure or inability to comply fully with the laws,regulations or codes applicable specifically to the financial services industry.Non-compliance could lead to fines, public reprimands, damage toreputation, enforced suspension of operations or, in extreme cases,withdrawal of authorisations to operate.

In addition, the Group’s businesses and earnings can be affected by thefiscal or other policies and other actions of various governmental andregulatory authorities in the United Kingdom, the European Union (‘EU’), theUnited States, South Africa and elsewhere. All these are subject to change,particularly in an environment where recent developments in the globalmarkets have led to an increase in the involvement of various governmentaland regulatory authorities in the financial sector and in the operations offinancial institutions. In particular, governmental and regulatory authoritiesin the United Kingdom, the United States and elsewhere are implementingmeasures to increase regulatory control in their respective banking sectors,including by imposing enhanced capital and liquidity requirements. Anyfuture regulatory changes may potentially restrict the Group’s operations,mandate certain lending activity and impose other compliance costs.

Areas where changes could have an impact include:

– the monetary, interest rate and other policies of central banks andregulatory authorities;

– general changes in government or regulatory policy that maysignificantly influence investor decisions in particular markets in whichthe Group operates;

– general changes in regulatory requirements, for example, prudentialrules relating to the capital adequacy framework and rules designed topromote financial stability and increase depositor protection;

– changes in competition and pricing environments;

– further developments in the financial reporting environment;

– differentiation amongst financial institutions by governments withrespect to the extension of guarantees to customer deposits and theterms attaching to those guarantees; and

– implementation of, or costs related to, local customer or depositorcompensation or reimbursement schemes.


Risk managementRisk factorscontinued

Further details of specific matters that impact the Group are included inthe Supervision and Regulation section on page 13 and Note 36 to thefinancial statements on page 87.

Financial reporting riskFinancial reporting risk arises from a failure or inability to comply fully withthe laws, regulations or codes in relation to the disclosure of financialinformation. Non compliance could lead to fines, public reprimands, damageto reputation, enforced suspension of operations or, in extreme cases,withdrawal of authorisations to operate. Further details of the Group’sinternal controls over financial reporting are included in the Accountabilityand Audit Section on page 20.

Legal riskThe Group is subject to a comprehensive range of legal obligations in allcountries in which it operates. As a result, the Group is exposed to manyforms of legal risk, which may arise in a number of ways. Primarily:

– the Group’s business may not be conducted in accordance withapplicable laws around the world;

– contractual obligations may either not be enforceable as intended ormay be enforced against the Group in an adverse way;

– the intellectual property of the Group (such as its trade names) may notbe adequately protected; and

– the Group may be liable for damages to third parties harmed by theconduct of its business.

The Group faces risk where legal proceedings are brought against it.Regardless of whether such claims have merit, the outcome of legalproceedings is inherently uncertain and could result in financial loss.

Defending legal proceedings can be expensive and time-consumingand there is no guarantee that all costs incurred will be recovered even if theGroup is successful. Although the Group has processes and controls tomanage legal risks, failure to manage these risks could impact the Groupadversely, both financially and by reputation.

Further details of the Group’s legal proceedings are included in the‘Legal proceedings’ note to the financial statements on page 86.

Taxation riskThe Group is subject to the tax laws in all countries in which it operates,including tax laws adopted at an EU level. A number of double taxationagreements entered between two countries also impact on the taxation ofthe Group. Tax risk is the risk associated with changes in tax law or in theinterpretation of tax law. It also includes the risk of changes in tax rates andthe risk of failure to comply with procedures required by tax authorities.Failure to manage tax risks could lead to an additional tax charge. It couldalso lead to a financial penalty for failure to comply with required taxprocedures or other aspects of tax law. If, as a result of a particular tax riskmaterialising, the tax costs associated with particular transactions aregreater than anticipated, it could affect the profitability of those transactions.

The Group takes a responsible and transparent approach to themanagement and control of its tax affairs and related tax risk, specifically:

– tax risks are assessed as part of the Group’s formal governanceprocesses and are reviewed by the Executive Committee, Group FinanceDirector and the Board Risk Committee;

– the tax charge is also reviewed by the Board Audit Committee;

– the tax risks of proposed transactions or new areas of business are fullyconsidered before proceeding;

– the Group takes appropriate advice from reputable professional firms;

– the Group employs high-quality tax professionals and provides ongoingtechnical training;

– the tax professionals understand and work closely with the differentareas of the business;

– the Group uses effective, well-documented and controlled processes toensure compliance with tax disclosure and filing obligations; and

– where disputes arise with tax authorities with regard to theinterpretation and application of tax law, the Group is committed toaddressing the matter promptly and resolving the matter with the taxauthority in an open and constructive manner.

Other Risk FactorsIn addition to the 13 Principal Risks, the Group’s high-level risk classificationincludes four other ‘Level 1’ risks. These risks are in general less amenable toformal quantification than the Principal Risks in terms of risk measurementor setting risk appetite. However, they retain the potential to impact theGroup’s performance.

Strategic RiskThe Group devotes substantial management and planning resources to thedevelopment of strategic plans for organic growth and identification ofpossible acquisitions, supported by substantial expenditure to generategrowth in customer business. If these strategic plans are not delivered asanticipated, the Group’s earnings could grow more slowly or decline. Inaddition, the Group’s strategy could be impacted by revenue volatility due tofactors such as macroeconomic conditions, inflexible cost structures,uncompetitive products or pricing and structural inefficiencies.

Change riskChange risk arises when the Group needs to make extensive changes to itsoperations. The cost of implementation projects may overrun, or they mayfail to achieve their objectives. Examples of situations in which change riskarises include the integration of acquired businesses, significant businessunit restructuring, changes in target operating models, the roll-out of newand potentially disruptive technologies, the introduction of a single currencysuch as the euro, and Group-wide projects to implement significant newregulation such as Basel II.

Corporate sustainability riskCorporate sustainability risk arises from the failure to identify and managethe impact of business decisions and activities on the community and theenvironment, covering the following themes: customers and clients,inclusive banking, the environment, diversity and responsible globalcitizenship. For more information, see page 16.

Brand management riskBarclays defines brand risk as the failure to manage the visual identity ofBarclays brands in an effective manner. This is distinct from reputationalimpact (damage to the general brand/reputation of Barclays), which is apotential by-product of financial, strategic or operational risks.


Risk managementSupervision and regulation

The Group’s operations, including its overseas offices, subsidiaries andassociates, are subject to a significant body of rules and regulations that area condition for authorisation to conduct banking and financial servicesbusiness, constrain business operations and affect financial returns. Theseinclude reserve and reporting requirements and conduct of businessregulations. These requirements are imposed by the relevant central banksand regulatory authorities that supervise the Group in the jurisdictions inwhich it operates. The requirements reflect global standards developed by,among others, the Basel Committee on Banking Supervision and theInternational Organisation of Securities Commissions. They also reflectrequirements derived from EU directives.

In the UK, the Financial Services Authority (FSA) is the independentbody responsible for the regulation and supervision of deposit taking, lifeinsurance, home mortgages, general insurance and investment business.Barclays Bank PLC is authorised by the FSA under the Financial Services andMarkets Act 2000 to carry on a range of regulated activities within the UKand is subject to consolidated supervision by the FSA. In its role assupervisor, the FSA seeks to maintain the safety and soundness of financialinstitutions with the aim of strengthening, but not guaranteeing, theprotection of customers and the financial system. The FSA’s continuingsupervision of financial institutions is conducted through a variety ofregulatory tools, including the collection of information from statistical andprudential returns, reports obtained from skilled persons, visits to firms andregular meetings with management to discuss issues such as performance,risk management and strategy.

The FSA adopts a risk-based approach to supervision. The startingpoint for supervision of all financial institutions is a systematic analysis of therisk profile for each authorised firm. The FSA has adopted a homogeneousrisk, processes and resourcing model in its approach to its supervisoryresponsibilities (known as the ARROW model) and the results of the riskassessment are used by the FSA to develop a risk mitigation programme fora firm. The FSA also promulgates requirements that banks and otherfinancial institutions are required to meet on matters such as capitaladequacy, limits on large exposures to individual entities and groups ofclosely connected entities, liquidity and rules of business conduct.

The Banking Act 2009 (the Banking Act) provides a permanent regimeto allow the FSA, the UK Treasury and the Bank of England to resolve failingbanks in the UK. Under the Banking Act, these authorities are given powers,including (a) the power to issue share transfer orders pursuant to which allor some of the securities issued by a bank may be transferred to acommercial purchaser or Bank of England entity and (b) the power totransfer all or some of the property, rights and liabilities of the UK bank to apurchaser or Bank of England entity. A share transfer order can extend to awide range of securities including shares and bonds issued by a UK bank(including Barclays Bank PLC) or its holding company (Barclays PLC) and

warrants for such shares and bonds. The Banking Act powers applyregardless of any contractual restrictions and compensation may be payablein the context of both share transfer orders and property appropriation.

The Banking Act also gives the Bank of England the power to override,vary or impose contractual obligations between a UK bank or its holdingcompany and its former group undertakings for reasonable consideration, inorder to enable any transferee or successor bank of the UK bank to operateeffectively. There is also power for the Treasury to amend the law (excludingprovisions made by or under the Banking Act) for the purpose of enabling itto use the regime powers effectively, potentially with retrospective effect. Inaddition, the Banking Act gives the Bank of England statutory responsibilityfor financial stability in the UK and for the oversight of payment systems.

Banks, insurance companies and other financial institutions in the UKare subject to a single financial services compensation scheme (theFinancial Services Compensation Scheme - FSCS) where an authorised firmis unable or is likely to be unable to meet claims made against it because ofits financial circumstances. Most deposits made with branches of BarclaysBank PLC within the European Economic Area (EEA) which are denominatedin Sterling or other EEA currencies (including the Euro) are covered by theFSCS. Most claims made in respect of investment business will also beprotected claims if the business was carried on from the UK or from a branchof the bank or investment firm in another EEA member state. The FSCS isfunded by levies on authorised UK firms such as Barclays Bank PLC. In theevent that the FSCS raises funds, raises those funds more frequently orsignificantly increases the levies to be paid by firms, the associated costs tothe Group may have a material impact on the Group’s results and financialcondition. Further details can be found in the ‘Competition and RegulatoryMatters’ note to the financial statements on page 87.

Outside the UK, the Group has operations (and main regulators)located in continental Europe, in particular France, Germany, Spain,Switzerland, Portugal and Italy (local central banks and other regulatoryauthorities); Asia Pacific (various regulatory authorities including the HongKong Monetary Authority, the Financial Services Agency of Japan, theAustralian Securities and Investments Commission, the Monetary Authorityof Singapore, the China Banking Regulatory Commission and the ReserveBank of India); Africa and the Middle East (various regulatory authoritiesincluding the South African Reserve Bank and the Financial Services Boardand the regulatory authorities of the United Arab Emirates) and the UnitedStates of America (including the Board of Governors of the Federal ReserveSystem (FRB), the Office of the Comptroller of the Currency (OCC) and theSecurities and Exchange Commission (SEC)).

In Europe, the UK regulatory agenda is considerably shaped andinfluenced by the directives emanating from the EU. These form part of theEuropean Single Market programme, an important feature of which is theframework for the regulation of authorised firms. This framework is


Risk managementSupervision and regulation continued

designed to enable a credit institution or investment firm authorised in oneEU member state to conduct banking or investment business through theestablishment of branches or by the provision of services on a cross-borderbasis in other member states without the need for local authorisation.Barclays operations in Europe are authorised and regulated by acombination of both home (the FSA) and host regulators.

Barclays operations in South Africa, including Absa Group Limited, aresupervised and regulated by the South African Reserve Bank (SARB) and theFinancial Services Board (FSB). SARB oversees the banking industry andfollows a risk-based approach to supervision whilst the FSB oversees thenon-banking financial services industry and focuses on enhancingconsumer protection and regulating market conduct.

In the United States, Barclays PLC, Barclays Bank PLC and Barclays USbanking subsidiaries are subject to a comprehensive regulatory structureinvolving numerous statutes, rules and regulations, including theInternational Banking Act of 1978, the Bank Holding Company Act of 1956,as amended (BHC Act), the Foreign Bank Supervision Enhancement Act of1991, the Financial Services Modernization Act of 1999 and the USAPATRIOT Act of 2001. Such laws impose restrictions on the activities ofBarclays, including its US banking subsidiaries and the Bank’s US branches,as well as prudential restrictions, such as limits on extensions of credit by theBank’s US branches and the US banking subsidiaries to affiliates. The Bank’sNew York and Florida branches are subject to extensive federal and statesupervision and regulation by the FRB and the New York and Florida bankingsupervisors. Barclays Bank PLC also operates a federal agency in Californiathat is licensed by and subject to regulation and examination by the OCC.Barclays Bank Delaware, a Delaware-chartered commercial bank, is subjectto supervision and regulation by the Delaware banking supervisor and theFederal Deposit Insurance Corporation (FDIC). Only the deposits of BarclaysBank Delaware are insured by the FDIC.

Barclays PLC, Barclays Bank PLC and Barclays Group US Inc. are bankholding companies registered with the FRB. Each has elected to be treatedas a financial holding company under the BHC Act. Financial holdingcompanies may engage in a broader range of financial and related activitiesthan are permitted to registered bank holding companies that do notmaintain financial holding company status, including underwriting anddealing in all types of securities. To maintain the financial holding companystatus of each of Barclays PLC, Barclays Bank PLC and Barclays Group USInc., Barclays Bank PLC is required to meet or exceed certain capital ratiosand to be deemed to be ‘well managed’. Barclays Bank Delaware must alsomeet certain capital requirements, be deemed to be ‘well managed’ andmust have at least a ‘satisfactory’ rating under the CommunityReinvestment Act of 1977.

Barclays US securities broker/dealer, investment advisory andInvestment banking operations are subject to ongoing supervision andregulation by the SEC, the Financial Industry Regulatory Authority (FINRA)and other government agencies and self-regulatory organisations as part ofa comprehensive scheme of regulation of all aspects of the securitiesbusiness under the US federal and state securities laws. Barclayssubsidiaries in the US are also subject to regulation by applicable federal andstate regulators of their activities in the mortgage servicing business.

Regulatory DevelopmentsIn the wake of the financial crisis there will be regulatory change that willhave a substantial impact on all financial institutions, including the Group.The full extent of this impact and its timing is not yet fully clear, with reformprogrammes being developed at global, EU and national level. A programmeto reform the global regulatory framework was agreed by G20 Heads ofGovernment in April 2009, building on an agreement that had been reachedby the G20 in November 2008. The EU is following a similar programme ofreform following the May 2008 ‘roadmap’ and implementing G20requirements. There is a substantial degree of commonality to theseprogrammes covering issues of capital and liquidity regulation, riskmanagement and accounting standards.

The Financial Stability Board (FSB) has been designated by the G20 asthe body responsible for co-ordinating the delivery of the reformprogramme. It has initiated work developing guidelines for the supervisionof systemically significant institutions. It is required to present its proposalsto the November 2010 meeting of G20 Heads of Government. The FSB isalso working on approaches to the resolution of systemically significantinstitutions that will include the preparation of Recovery and ResolutionPlans, sometimes called ‘living wills’. Further detail is awaited from the FSB,although the FSA has initiated a pilot project with a group of large UK banks.

In execution of the mandate given by the G20 and the FSB, the BaselCommittee on Banking Supervision has agreed on increased capitalrequirements for trading book activities to be introduced from the end of2010. In December 2009, the Basel Committee issued proposals forconsultation on enhanced capital and liquidity requirements. Theseproposals would refine the definition of regulatory capital to have a greaterfocus on core equity, would enhance capital requirements in respect ofcounterparty risk, introduce measures to make capital requirements lessprocyclical, establish a leverage ratio and require banks to hold greaterbuffers of high quality liquid instruments. The Basel Committee will conducta quantitative impact study on its proposals in the course of the first half of2010, with a view to finalising its requirements by the end of the year andwith the aim of commencing the transition to the new capital and liquidityregime from the end of 2012.


The Basel Committee’s trading book proposals are being implementedin the EU by amendment to the Capital Requirements Directive (CRD). TheCRD has also been amended to tighten the definition of hybrid capital andthe operation of the large exposures regime in relation to interbanktransactions. The EU has indicated that it will further amend the CRD toimplement revised global standards on capital adequacy and on liquiditythat are being consulted on by the Basel Committee. The EU will alsoconduct a Europe-focused quantitative impact study. In addition, otheramendments are being made to the EU framework of directives, including tothe Directive and to the Directive on Deposit Guarantee Schemes. Furtheramendments to EU regulatory requirements are likely as the EU develops itsresponse to the financial crisis, including the structure of the regulatorysystem in Europe as proposed in the report of a high-level Commissiongroup published in February 2009. Among other things, it is proposed by theend of 2010 to create a European Banking Authority charged with thedevelopment of a single rulebook for banks in the EU. National authoritieswill remain responsible for the supervision of financial institutions.

In the UK, the Treasury issued a White Paper ‘Reforming FinancialMarkets’ in July 2009 that foreshadowed the introduction of a FinancialServices Bill in November. The Financial Services Bill will among other thingscreate a Council for Financial Stability to co-ordinate the activities of the UKtripartite authorities (HM Treasury, the FSA and the Bank of England) to dealwith issues related to financial stability and systemic risk. It will also place aduty on the FSA to make rules requiring financial institutions to create andmaintain Recovery and Resolution plans, require the FSA to make generalrules about remuneration policies of regulated firms, give the FSA a widerauthority to prohibit short selling and permit collective court actions as ameans by which redress can be sought in cases where there has been amass failure of practice that has affected significant numbers of consumers.The Financial Services Bill is currently going through the Parliamentaryprocess and its likely final shape remains uncertain. In response to theintroduction of the Financial Services Bill, the Conservative Party indicated inJuly 2009 that, were it to have a majority following the General Election thatmust take place by early June 2010, it would transfer responsibility forprudential supervision to the Bank of England and create a ConsumerProtection Agency to focus on issues of business conduct.

The Chancellor of the Exchequer commissioned two major reviews ofthe regulation of banks that reported in 2009. Lord Turner, the Chairman ofthe FSA was requested to undertake a review of banking regulation, while SirDavid Walker was asked to review the corporate governance of financialinstitutions.The Turner Review, published in March 2009, sets out acomprehensive approach to reform the regulation of banks, and for higherstandards of capital, liquidity and risk management. It also sets out a moreintensive and intrusive approach to supervision. This was already indevelopment as part of the FSA’s Supervisory Enhancement Programme

that has seen an increase in the resources devoted to supervision, theintensity of supervision and the penalties that may be applied in anyenforcement action. Pending international agreement, the FSA hasunilaterally set minimum capital requirements that are very substantiallyincreased from pre-crisis levels. Similarly, the FSA is introducing a regulatoryliquidity regime in advance of international agreement on the Baselproposals. The Walker Review, published in November 2009, sets outproposals for reforms to the corporate governance of financial institutions.The Financial Services Bill referred to above will give the FSA enablingpowers to implement some of these.

In the United States, as elsewhere, recent market disruptions andeconomic conditions have led to numerous proposals for changes to andsignificant increases in the regulation of the financial services industry.These proposals include: possible limitations on the activities of bankinginstitutions such as prohibitions on engaging in proprietary tradingoperations that are not related to serving customers; proposals that wouldsubject large and systemically important banks and financial institutions toenhanced regulatory requirements; and financial market and tradingreforms such as the Wall Street Reform and Consumer Protection Act 2009,which was passed by the US House of Representatives in December 2009and which would, if enacted, among other things, increase regulation ofover-the-counter derivatives by imposing clearing and executionrequirements on swap dealers and major swap market participants.However, these and other proposals are still under consideration and there isuncertainty as to whether and in what forms such proposals ultimately maybe enacted or adopted and therefore what impact they will have on theGroup and its businesses in the United States. The Obama Administrationhas also proposed the levying of a Financial Crisis Responsibility Fee (FCRF).The Administration has said that the FCRF will apply to the US subsidiariesof a foreign bank or financial company if the consolidated assets of the USsubsidiaries exceed £50bn.

As legislation implementing the FCRF has not yet been proposed, theimpact of the FCRF on the Group cannot yet be determined.

The credit card-related activities of the Group in the US will besignificantly affected by the Credit Card Accountability, Responsibility andDisclosure Act of 2009 (Credit CARD Act) which was passed by Congress.The Credit CARD Act will have the effect of restricting many credit cardpricing and marketing practices. Among the numerous provisions, whichcome into effect at various times through August 2010, are those thatprohibit increasing rates on existing balances and over limit fees in mostinstances, restrict increasing fees and rates prospectively, restrict whatpenalty fees can be assessed, regulate how payments are to be allocated todifferent balances and how the billing process is to work, and revises allcommunications to cardholders.


SustainabilityResponsible banking

Barclays is making progress on embedding sustainability into ourbusiness. We are ranked in the top quartile of global banks in theDow Jones Sustainability Index. However, we realise we have a long way to go and will continue to build our programme in the year ahead. We have remained ‘open for business’ throughout

the downturn, and at the same time have reinforced our commitment to bea responsible lender, providing access to credit and support whilemaintaining prudent lending standards. We are focused on offering a strong,safe and responsible service that contributes to the economic progress ofsociety as a whole.

As well as supporting our customers and clients, and the communitiesin which we operate, we have:

– developed our role as an equal opportunities employer;

– taken action on climate issues; and

– aimed to operate as a responsible global citizen.

The Group Executive Committee is responsible for our overall sustainabilitystrategy, and works to support the Chief Executive in its implementation.This Committee, along with the Board, reviews progress againstsustainability objectives twice a year, using a robust reporting frameworkthat includes over 100 performance indicators. We integrate sustainabilityinto our operations in five areas.

Customers and clientsIn 2009, we continued to help customers make the most of their moneywith advice, innovative new products and services, and tailor-made help for those in financial difficulty.

Whilst remaining conservative in our approach to risk, we have remainedcompetitive in the mortgage market and increased our lending by 7% to a mortgage balance of £87.9bn at the end of 2009. At the same timeBarclaycard provided a package of support, including a price freeze for manyof our UK customers.

In April 2009, we committed to make an additional £11bn of creditavailable to the UK economy over the year. Our gross new lending in 2009was £35bn, about half to households and half to businesses.

Financial inclusionIn the UK our Cash Card Account is an entry-level bank account with almost844,000 customers, many living in deprived areas, while Money Skills is anew programme designed to help disadvantaged people make informed,responsible financial decisions.

Across Africa, we offer dedicated accounts for people on low incomes,and are one of the only global banks to work with indigenous financialsystems as a way of providing wider access to financial services.

EnvironmentAs part of our commitment to minimising our environmental footprint, wesuccessfully made our global banking operations carbon neutral in 2009.

Barclays Climate Action Programme continues to focus on greaterenergy efficiency, as well as working with suppliers to reduce their CO2

emissions and developing products and services that will help ourcustomers to do the same.

Partnerships are also a crucial part of the programme, such as our workwith the World Wildlife Fund in eastern Africa to pioneer a new era ofconservation in the region where communities are supported to utilise theirresources more sustainably.

Many of our major environmental and social impacts are indirect andarise through business relationships with suppliers and clients. OurEnvironmental and Social Impact Assessment policy focuses on any lendingwe carry out in sensitive sectors and is also the mechanism by which weapply the Equator Principles to our projects. The Equator Principles are basedon the International Finance Corporation’s Performance standards, whichform the financial services industry standard to manage environmental andsocial risks in project finance deals above US$10m.

Our Environmental Risk Management team operates across the Group, and in 2009 it assessed more than 290 project and non-projectfinance transactions.

Diversity and our peopleOur diversity and inclusion strategy is focused on increasing the number of senior women across our business. To read more refer to page 24.

CitizenshipWith more than 48 million customers in over 50 countries, we must act as a responsible global citizen. This means ensuring that we do business in asocially and ethically responsible way, while working with our supply chainpartners to ensure they adopt a similar set of principles.

Barclays believes that banks have a crucial role to play within thecommunities they serve – even more so during these challenging economic times.

In 2009, as well committing over £55m to community initiatives around the world, we also invested our skills and resources. 58,000employees gave their time to support a wide range of projects, from helpingthose affected by HIV/AIDS in Africa, to providing free financial advice forelderly people in the UK.

Barclays operates in accordance with the Universal Declaration ofHuman Rights, and Barclays Statement on Human Rights further integratesthese issues through our employment policies and practices, our supplychain and the responsible use of our products and services.

In 2009, working with the United Nations Environment ProgrammeFinance Initiative we developed a human rights toolkit which provides aframework for lending managers, and which we have embedded into ourown employee guidance tools on environmental risk.

As well as managing our own direct social, ethical and environmentalimpacts, by working closely with our suppliers we can help them to shareour commitment to sustainability.

This was underlined in 2009 with the launch of a new statement onSupply Chain Sustainability, outlining how we work with suppliers and whatwe expect from them in return.


Our people

Global minimum standardsTo maintain the right balance between overall control and effective localdecision making we have established global governance frameworks andminimum standards to regulate how we manage and treat our employeesaround the world. The key areas covered by the minimum standards aresummarised below.

Performance management and compensationThe performance and development process provides employees with theopportunity to have regular discussions with their line managers about theirperformance and to receive coaching for their personal development. Theemployees’ performance is typically assessed twice a year and aperformance rating is agreed with the line manager.

We are committed to the principle of pay for performance.Compensation is based on the performance of individuals and theirbusinesses. Our compensation philosophy is to drive a high performanceculture within the appropriate risk and governance frameworks.

Employee relationsBarclays recognises and works constructively with 30 employeerepresentative organisations throughout the world.

Regular employee opinion surveys are used to assess employeeengagement. The findings are benchmarked against other global financialservices organisations and high-performing organisations.

Diversity and inclusionBarclays operates across the globe and deals with employees across awealth of diverse and rich cultures. Our mission is to create confidence andtrust to do the right thing for both our customers and employees throughcreating a truly inclusive environment. We will achieve this through ensuringthat everything that we do treats people fairly through valuing diversity. Anexample of the progress made in this area is that currently three of our majorbusinesses have female Chief Executive Officers who lead more than half ofour employees globally.

Health and SafetyOur commitment is to ensure the health, safety and welfare of ouremployees and to provide and maintain safe working conditions. Effectivemanagement of health and safety will have a positive effect on the serviceswe provide. Good working climates will help our employees to performbetter in serving our customers which in turn will create value for all ourstakeholders – customers, employees, shareholders and the communitiesthat we serve.

TrainingDeveloping both existing and new employees is key to our future prosperity.We undertake this through formal classroom-based training and informalon-the-job training, education and coaching. Minimum mandatory trainingis provided to all employees to ensure that our employees understandBarclays policies and procedures and their role in meeting our regulatoryresponsibilities.


Directors’ report

Business Review and Principal ActivitiesThe Company is required to set out in this report a fair review of the businessof the Group during the financial year ended 31st December 2009 and ofthe position of the Group at the end of the financial year and a description ofthe principal risks and uncertainties facing the Group (known as a ‘BusinessReview’). The purpose of the Business Review is to enable shareholders toassess how the Directors have performed their duty under Section 172 ofthe Companies Act 2006 (duty to promote the success of the Company).

The information that fulfils the requirements of the Business Review canbe found on pages 2 to 17 and is incorporated into this report by reference.

From the perspective of the Bank, the review of the business and theprincipal risks and uncertainties facing the Company are integrated withthose of Barclays PLC, the Bank’s ultimate parent. Therefore additionalinformation may be found in the 2009 Annual Report of Barclays PLC, whichdoes not form part of this report.

Barclays is a major global financial services provider engaged in retailbanking, credit cards, corporate and investment banking and wealthmanagement. Barclays operates through branches, offices and subsidiariesin the UK and overseas.

The results of the Group show a pre-tax profit of £4,559m (2008: £5,094m) for the year and profit after tax of £10,289m (2008: £5,249m). The Group had net assets of £58,699m at 31st December 2009 (2008: £43,574m).

Profit AttributableThe profit attributable to Barclays PLC, the Bank’s parent, for the year 2009 amounted to £10,219m (2008: £6,157m).

DividendsTotal dividends on ordinary shares paid during 2009 are set out in Note 1 to the accounts.

Dividends paid on preference shares for the year ended 31st December 2009 amounted to £477m (2008: £390m).

Share CapitalOrdinary share capital was increased during the year by the issue to Barclays PLC of 4,388,000 ordinary shares, credited as fully paid, inconsideration of cash payments of £25m. Barclays PLC owns 100% of the issued ordinary shares.

Annual Report on Form 20-F An Annual Report on Form 20-F is being filed with the US Securities andExchange Commission (SEC) and copies will be available from one of theJoint Secretaries on request to the Head office at 1 Churchill Place, LondonE14 5HP. It is possible to read and copy documents that have been filed byBarclays PLC and Barclays Bank PLC with the SEC at the SEC’s office ofInvestor Education and Advocacy located at 100 F Street, NE, WashingtonDC 20549. Please call the SEC at 1-800-SEC-0330 for further information onthe public reference rooms and their copy charges. Filings with the SEC arealso available to the public from commercial document retrieval services,and from the website maintained by the SEC at www.sec.gov.

Directors The Directors of the Bank are listed on page 20. The Directors’ interests inshares are set out in Note 41 of Barclays PLC’s Annual Report and Accounts.The membership of the Boards of the Bank and of Barclays PLC is identical.

Board MembershipThe membership of the Boards of Directors of Barclays PLC and BarclaysBank PLC is identical. Simon Fraser and Reuben Jeffery were appointed asnon-executive Directors with effect from 10th March 2009 and 16th July2009 respectively. The following Directors left the Board during 2009:

– Professor Dame Sandra Dawson on 23rd April 2009

– Sir Nigel Rudd on 23rd April 2009

– Patience Wheatcroft on 16th June 2009

– Stephen Russell on 31st October 2009

– Frits Seegers on 3rd November 2009

Directors’ IndemnitiesQualifying third party indemnity provisions (as defined by section 234 of theCompanies Act 2006) were in force during the course of the financial yearended 31st December 2009 for the benefit of the then Directors and, at thedate of this report, are in force for the benefit of the Directors in relation tocertain losses and liabilities which they may incur (or have incurred) inconnection with their duties, powers or office.

Community Involvement and Charitable DonationsBarclays has an extensive community programme covering many countriesaround the world. The Group provides funding and support to over 7,000 charities and voluntary organisations, ranging from small, localcharities, like Passage (UK), to international organisations like Unicef. We alsohave a very successful employee programme which in 2009 saw more than58,000 employees and pensioners worldwide taking part in Barclays-supported volunteering, giving and fundraising activities.

The total commitment for 2009 was £54.9m (2008: £52.2m). The Group committed £27.4m in support of the community in the UK (2008: £27.7m) and £27.5m was committed in international support (2008: £24.5m). The UK commitment includes £19.3m of charitabledonations (2008: £19.6m).

Employee InvolvementBarclays is committed to ensuring that employees share in the success of the Group. Staff are encouraged to participate in share option and sharepurchase schemes and have a substantial sum invested in the shares ofBarclays PLC.

Employees are kept informed of matters of concern to them in a varietyof ways, including the corporate news magazines, intranets, briefings andmobile phone SMS messaging. These communications help achieve acommon awareness among employees of the financial and economicfactors affecting the performance of Barclays.

Barclays is also committed to providing employees with opportunities toshare their views and provide feedback on issues that are important tothem. An annual Employee Opinion Survey is undertaken across GlobalRetail and Commercial Banking and Group Centre with results beingreported to the Board and the Board HR and Remuneration Committee, all employees and to our European Works Council, Africa Forum, Unite(Amicus section), our recognised union in the UK and other recognisedunions worldwide. Roadshows and employee forums also take place.

In addition, Barclays undertakes regular and formal consultations withour recognised trade unions and works councils internationally.


Diversity and InclusionThe diversity agenda at Barclays seeks to include customers, colleagues andsuppliers. Our objective is to recruit and retain the best people, regardless of(but not limited to) race, religion, age, gender, sexual orientation or disability.We strive to ensure our workforce reflects the communities in which weoperate and the international nature of the organisation. We recognise thatdiversity is a key part of responsible business strategy in support of ourincreasingly global business.In the UK, Barclays is committed to providingadditional support to employees with disabilities and making it easier forthem to inform us of their specific requirements, including the introductionof a dedicated intranet site and disability helpline. Through our UKReasonable Adjustments Scheme, appropriate assistance can be given,including both physical workplace adjustments, and relevant training andaccess to trained mentors is also provided for disabled employees. A widerange of recruitment initiatives have been taken to increase the number ofpeople with disabilities working in Barclays.

Creditors’ Payment Policy Barclays values its suppliers and acknowledges the importance of payinginvoices, especially those of small businesses, in a timely manner. Barclayspolicy follows the Department for Business, Innovation & Skills’ PromptPayment Code, copies of which can be obtained from the Prompt PaymentCode website at www.promptpaymentcode.org.uk. Part 5 of Schedule 7 ofthe Large and Medium-sized Companies and Groups (Accounts andReports) Regulations 2008 requires disclosure of trade creditor paymentdays. The Company’s accounts are prepared in accordance with IFRS. Thecomponents for the trade creditor calculation are not easily identified.However, by identifying as closely as possible the components that would be required if item E.4 (trade creditors) in format I of Schedule 1 of theseRegulations applied, the trade creditor payment days for Barclays Bank PLCfor 2009 were 27 days (2008: 24 days). This is an arithmetical calculationand does not necessarily reflect our practice, which is described above, northe experience of any individual creditor.

Essential business contractsThere are no persons with whom the Group has contractual or otherarrangements that are considered essential to the business of the Group.

Contracts of SignificanceUnder the terms of a stock purchase agreement dated 16th June 2009which was entered into by and among Barclays Bank PLC, Barclays PLC andBlackRock, Inc. (BlackRock), Barclays agreed to sell BGI to BlackRock. Thesale completed on 1st December 2009 following the receipt of all necessaryshareholder and regulatory approvals and satisfaction of other closingconditions. The consideration at completion was US$15.2bn (£9.5bn),including 37.567 million new BlackRock shares, giving Barclays an economicinterest of 19.9% of the enlarged BlackRock group. Barclays has providedBlackRock with customary warranties and indemnities in connection withthe sale. Barclays Bank will also continue to provide support in respect ofcertain BGI cash funds until December 2013 and indemnities in respect ofcertain of BGI’s fully collateralised securities lending activities until 30th November 2012.

Research and DevelopmentIn the ordinary course of business the Group develops new products andservices in each of its business units.

Financial InstrumentsBarclays financial risk management objectives and policies, including thepolicy for hedging each major type of forecasted transaction for whichhedge accounting is used, and the exposure to market risk, credit risk andliquidity risk are set out in Notes 45 to 48 to the accounts.

Events after the Balance Sheet DateOn 1st January 2010, the Group acquired 100% ownership of Standard LifeBank Plc for a consideration of £227m in cash. The assets acquired includea savings book of approximately £5.8bn, and a mortgage book withoutstanding balances of approximately £7.5bn.

As announced on 3rd November 2009, the Group has made changesto its business structure, which will be reflected in the Group’s externalfinancial reporting for periods commencing 1st January 2010. The segmentalinformation presented in this Annual Report represents the businesssegments and other operations used for management and reportingpurposes during the year ended 31st December 2009.

The AuditorsThe Board Audit Committee reviews the appointment of the externalauditors, as well as their relationship with the Group, including monitoringthe Group’s use of the Group’s auditors for non-audit services and thebalance of audit and non-audit fees paid to the auditors. More details on this can be found on page 43 and Note 9 to the accounts.PricewaterhouseCoopers LLP have been the Company’s auditors for manyyears. Having reviewed the independence and effectiveness of the externalauditors, the Committee has not considered it necessary to date to requirethem to tender for the audit work. The external auditors are required torotate the audit partners responsible for the Group and subsidiary auditsevery five years. The current lead audit partner, who has now been in placefor five years, will be replaced for the 2010 year-end. There are nocontractual obligations restricting the Company’s choice of external auditor.The Committee has recommended to the Board that the existing auditors,PricewaterhouseCoopers LLP, be reappointed. PricewaterhouseCoopers LLPhave signified their willingness to continue in office and an ordinaryresolution reappointing them as auditors and authorising the Directors to set their remuneration will be proposed at the 2010 AGM.

So far as each of the Directors are aware, there is no relevant auditinformation of which the Company’s auditors are unaware. Each of theDirectors has taken all the steps that he ought to have taken as a Director inorder to make himself aware of any relevant audit information and toestablish that the Company’s auditors are aware of that information. Forthese purposes, ‘relevant audit information’ means information needed bythe Company’s auditors in connection with preparing their report.

By order of the Board

Lawrence DickinsonJoint Secretary 9th March 2010


Directors and Officers and Statement ofDirectors’ responsibilities for accounts

Current Directors and Officers

Marcus Agius – Group Chairman

Executive Directors John Varley – Group Chief Executive Robert E Diamond Jr – President, Barclays PLC and Chief Executive,Corporate and Investment Banking and Wealth ManagementChris Lucas – Group Finance Director

Non-executive Directors Sir Richard Broadbent – Deputy Chairman David Booth Richard Leigh Clifford, AOFulvio Conti Simon FraserReuben Jeffery IIISir Andrew Likierman Sir Michael Rake Sir John Sunderland

Appointed toCurrent Executive Committee members Executive Committee

John Varley Group Chief Executive 1996

Robert E Diamond Jr President, Barclays PLC, 1997Chief Executive, Corporate and Investment Banking and Wealth Management

Chris Lucas Group Finance Director 2007

Jerry del Missier Co-Chief Executive, Corporate 2009and Investment Banking

Mark Harding Group General Counsel 2009

Antony Jenkins Chief Executive, 2009Global Retail Banking

Tom Kalaris Chief Executive, Barclays Wealth 2009

Robert Le Blanc Group Risk Director 2009

Maria Ramos Chief Executive, Absa 2009

Rich Ricci Co-Chief Executive 2009Corporate and Investment Banking

Cathy Turner Group Human Resources Director 2009

Other Officers Appointed to position

Peter Estlin Group Financial Controller 2008

Lawrence Dickinson Joint Secretary 2002

Patrick Gonsalves Joint Secretary 2002

Statement of Directors’ Responsibilities for Accounts Going concernThe Group’s business activities and financial position, the factors likely toaffect its future development and performance, and its objectives andpolicies in managing the financial risks to which it is exposed and its capitalare discussed in the Business Review.

The Directors have assessed, in the light of current and anticipatedeconomic conditions, the Group’s ability to continue as a going concern.

The Directors confirm they are satisfied that the Company and theGroup have adequate resources to continue in business for the forseeablefuture. For this reason, they continue to adopt the ‘going concern’ basis forpreparing accounts.

Statement of Directors’ responsibilities for accountsThe following statement, which should be read in conjunction with theAuditors’ report set out on page 21, is made with a view to distinguishing forshareholders the respective responsibilities of the Directors and of theauditors in relation to the accounts.

The Directors are required by the Companies Act 2006 to prepareaccounts for each financial year and, with regards to Group accounts, inaccordance with Article 4 of the IAS Regulation. The Directors have preparedindividual accounts in accordance with IFRS as adopted by the EuropeanUnion. The accounts are required by law and IFRS to present fairly thefinancial position of the Company and the Group and the performance forthat period. The Companies Act 2006 provides, in relation to such accounts,that references to accounts giving a true and fair view are references to fairpresentation.

The Directors consider that, in preparing the accounts on pages 34 to39, and the additional information contained on pages 40 to 166, the Group has used appropriate accounting policies, supported by reasonablejudgements and estimates, and that all accounting standards which theyconsider to be applicable have been followed.

The Directors have responsibility for ensuring that the Company andthe Group keep accounting records which disclose with reasonableaccuracy the financial position of the Company and the Group and whichenable them to ensure that the accounts comply with the Companies Act2006.

The Directors have general responsibility for taking such steps as arereasonably open to them to safeguard the assets of the Group and toprevent and detect fraud and other irregularities.

Disclosure controls and proceduresThe Group Chief Executive, John Varley, and the Group Finance Director,Chris Lucas, conducted with Group Management an evaluation of theeffectiveness of the design and operation of the Group’s disclosure controlsand procedures as at 31st December 2009, which are defined as thosecontrols and procedures designed to ensure that information required to bedisclosed in reports filed or submitted under the US Securities Exchange Actof 1934 is recorded, processed, summarised and reported within the timeperiods specified in the US Securities and Exchange Commission’s rules andforms. As of the date of the evaluation, the Group Chief Executive and GroupFinance Director concluded that the design and operation of thesedisclosure controls and procedures were effective.

The Directors confirm to the best of their knowledge that:

(a) The financial statements, prepared in accordance with the applicable setof accounting standards, give a true and fair view of the assets, liabilities,financial position and profit or loss of Barclays PLC and the undertakingsincluded in the consolidation taken as a whole; and

(b) The management report, which is incorporated into the Directors’ Reporton pages 18 and 19, includes a fair review of the development andperformance of the business and the position of Barclays PLC and theundertakings included in the consolidation taken as a whole, togetherwith a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board

Marcus AgiusGroup Chairman 9th March 2010

Independent Auditors’ report

Independent Auditors’ Report to the members of Barclays Bank PLCWe have audited the Group and Parent Company financial statements(the ‘financial statements’) of Barclays Bank PLC for the year ended31st December 2009 which comprise: the Consolidated income statementand the related Consolidated statement of comprehensive income,Consolidated and Parent balance sheets, Consolidated and Parent statementsof changes in equity and Consolidated and Parent cash flow statements, theAccounting Policies and the related notes. The financial reporting frameworkthat has been applied in their preparation is applicable law and InternationalFinancial Reporting Standards (IFRS) as adopted by the European Unionand, as regards the Parent Company financial statements, as applied inaccordance with the provisions of the Companies Act 2006.

Respective responsibilities of Directors and AuditorsAs explained more fully in the Directors’ Responsibilities Statement, thedirectors are responsible for the preparation of the financial statements andfor being satisfied that they give a true and fair view. Our responsibility is toaudit the financial statements in accordance with applicable law andInternational Standards on Auditing (UK and Ireland). Those standardsrequire us to comply with the Auditing Practices Board’s Ethical Standardsfor Auditors.

This report, including the opinions, has been prepared for and only forthe company’s members as a body in accordance with Chapter 3 of Part 16of the Companies Act 2006 and for no other purpose. We do not, in givingthese opinions, accept or assume responsibility for any other purpose or toany other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures inthe financial statements sufficient to give reasonable assurance that thefinancial statements are free from material misstatement, whether causedby fraud or error. This includes an assessment of: whether the accountingpolicies are appropriate to the company’s circumstances and have beenconsistently applied and adequately disclosed; the reasonableness ofsignificant accounting estimates made by the directors; and the overallpresentation of the financial statements.

Opinion on financial statements In our opinion:

– the financial statements give a true and fair view of the state of the Group’sand of the Parent Company’s affairs as at 31st December 2009 and of theGroup’s profit and the Group’s and Parent Company’s cash flows for theyear then ended;

– the Group financial statements have been properly prepared inaccordance with IFRS as adopted by the European Union;

– the Parent Company financial statements have been properly prepared inaccordance with IFRS as adopted by the European Union and as applied inaccordance with the provisions of the Companies Act 2006; and

– the financial statements have been prepared in accordance with therequirements of the Companies Act 2006 and, as regards the Groupfinancial statements, Article 4 of the lAS Regulation.

Opinion on other matter prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the financialyear for which the financial statements are prepared is consistent with thefinancial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where theCompanies Act 2006 requires us to report to you if, in our opinion:

– adequate accounting records have not been kept by the Parent Company,or returns adequate for our audit have not been received from branchesnot visited by us; or

– the Parent Company financial statements are not in agreement with theaccounting records and returns; or

– certain disclosures of Directors’ remuneration specified by law are notmade; or

– we have not received all the information and explanations we require forour audit.

Philip Rivett (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon, United Kingdom9th March 2010

a) The maintenance and integrity of the Barclays plc website is the responsibility of thedirectors; the work carried out by the auditors does not involve consideration of thesematters and, accordingly, the auditors accept no responsibility for any changes that mayhave occurred to the financial statements since they were initially presented on the website.

b) Legislation in the United Kingdom governing the preparation and dissemination of financialstatements may differ from legislation in other jurisdictions.



Consolidated accounts Barclays Bank PLCAccounting policies

Significant accounting policies1. Reporting entityThese financial statements are prepared for the Barclays Bank PLC Groupunder Section 399 of the Companies Act 2006. The Group is a major globalfinancial services provider engaged in retail and commercial banking, creditcards, investment banking, wealth management and investmentmanagement services. In addition, individual financial statements havebeen prepared for the holding company, Barclays Bank PLC (‘the Bank’),under Section 397 of the Companies Act 2006.

Barclays Bank PLC is a public limited company, incorporated in GreatBritain and having a registered office in England.

2. Compliance with International Financial Reporting StandardsThe consolidated financial statements of the Barclays Bank PLC Group, andthe individual financial statements of Barclays Bank PLC, have been preparedin accordance with International Financial Reporting Standards (IFRS) andinterpretations issued by the International Financial ReportingInterpretations Committee (IFRIC), as published by the InternationalAccounting Standards Board (IASB). They are also in accordance with IFRSand IFRIC interpretations as adopted by the European Union.

The principal accounting policies applied in the preparation of theconsolidated and individual financial statements are set out below. Thesepolicies have been consistently applied. Changes in accounting policy are setout on page 31.

3. Basis of preparationThe consolidated and individual financial statements have been preparedunder the historical cost convention modified to include the fair valuation ofinvestment property, certain financial instruments and contracts to buy orsell non-financial items and trading inventories to the extent required orpermitted under accounting standards and as set out in the relevantaccounting polices. They are stated in millions of pounds Sterling (£m), thecurrency of the country in which Barclays Bank PLC is incorporated.

Critical accounting estimatesThe preparation of financial statements in accordance with IFRS requires theuse of certain critical accounting estimates. It also requires management toexercise judgement in the process of applying the accounting policies. Thenotes to the financial statements set out areas involving a higher degree ofjudgement or complexity, or areas where assumptions are significant to theconsolidated and individual financial statements such as fair value offinancial instruments (Note 50), allowance for loan impairment (Note 47),goodwill (Note 20), intangible assets (Note 21), retirement benefitobligations (Note 29), derecognition of financial assets (Note 12), taxation(Note 10) and credit risk (Note 47).

4. Consolidation SubsidiariesThe consolidated financial statements combine the financial statements ofBarclays Bank PLC and all its subsidiaries, including certain special purposeentities (SPEs) where appropriate, made up to 31st December. Entitiesqualify as subsidiaries where the Group has the power to govern thefinancial and operating policies of the entity so as to obtain benefits from itsactivities, generally accompanying a shareholding of more than one half ofthe voting rights. The existence and effect of potential voting rights that arecurrently exercisable or convertible are considered in assessing whether theGroup controls another entity. Details of the principal subsidiaries are givenin Note 42.

SPEs are consolidated when the substance of the relationship betweenthe Group and that entity indicates control. Potential indicators of controlinclude, amongst others, an assessment of the Group’s exposure to the risksand benefits of the SPE.

This assessment of risks and benefits is based on arrangements in placeand the assessed risk exposures at that time. The initial assessment isreconsidered at a later date if:

a) the Group acquires additional interests in the entity;

b) the contractual arrangements of the entity are amended such that therelative exposure to risks and benefits change; or

c) if the Group acquires control over the main operating and financialdecisions of the entity

Subsidiaries are consolidated from the date on which control istransferred to the Group and cease to be consolidated from the date thatcontrol ceases.

The acquisition method of accounting is used to account for thepurchase of subsidiaries. The cost of an acquisition is measured at the fairvalue of the assets given, equity instruments issued and liabilities incurred orassumed, plus any costs directly related to the acquisition.

The excess of the cost of an acquisition over the Group’s share of the fairvalue of the identifiable net assets acquired is recorded as goodwill. Seeaccounting policy 14 for the accounting policy for goodwill. A gain onacquisition is recognised in profit or loss if there is an excess of the Group’sshare of the fair value of the identifiable net assets acquired over the cost ofthe acquisition. Intra-group transactions and balances are eliminated onconsolidation and consistent accounting policies are used throughout theGroup for the purposes of the consolidation.

As the consolidated financial statements include partnerships where aGroup member is a partner, advantage has been taken of the exemptionunder Regulation 7 of the Partnerships (Accounts) Regulations 2008 withregard to the preparation and filing of individual partnership financialstatements.


Associates and joint venturesAn associate is an entity in which the Group has significant influence, butnot control, over the operating and financial management policy decisions.This is generally demonstrated by the Group holding in excess of 20%, butno more than 50%, of the voting rights.

A joint venture exists where the Group has a contractual arrangementwith one or more parties to undertake activities typically, though notnecessarily, through entities which are subject to joint control.

Unless designated as at fair value through profit and loss as set out inpolicy 7, the Group’s investments in associates and joint ventures are initiallyrecorded at cost and increased (or decreased) each year by the Group’sshare of the post-acquisition profit (or loss), or other movements reflecteddirectly in the equity of the associated or jointly controlled entity. Goodwillarising on the acquisition of an associate or joint venture is included in thecarrying amount of the investment (net of any accumulated impairmentloss). When the Group’s share of losses or other reductions in equity in anassociate or joint venture equals or exceeds the recorded interest, includingany other unsecured receivables, the Group does not recognise furtherlosses, unless it has incurred obligations or made payments on behalf of theentity.

The Group’s share of the results of associates and joint ventures is basedon financial statements made up to a date not earlier than three monthsbefore the balance sheet date, adjusted to conform with the accountingpolices of the Group. Unrealised gains on transactions are eliminated to theextent of the Group’s interest in the investee. Unrealised losses are alsoeliminated unless the transaction provides evidence of impairment in theasset transferred.

In the individual financial statements, investments in associates andjoint ventures are stated at cost less impairment, if any.

5. Foreign currency translationItems included in the financial statements of each of the Group’s entities aremeasured using their functional currency, being the currency of the primaryeconomic environment in which the entity operates.

Foreign currency transactions are translated into the appropriatefunctional currency using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currencies areretranslated at the rate prevailing at the period end. Foreign exchange gainsand losses resulting from the retranslation and settlement of these items arerecognised in the income statement except for qualifying cash flow hedgesor hedges of net investments. See policy 12 for the policies on hedgeaccounting.

Non-monetary assets that are measured at fair value are translatedusing the exchange rate at the date that the fair value was determined.Exchange differences on equities and similar non-monetary items held at

fair value through profit or loss, are reported as part of the fair value gain orloss. Translation differences on equities classified as available for salefinancial assets and similar non-monetary items are included directly in equity.

For the purposes of translation into the presentational currency, assets,liabilities and equity of foreign operations are translated at the closing rate,and items of income and expense are translated into Sterling at the ratesprevailing on the dates of the transactions, or average rates of exchangewhere these approximate to actual rates.

The exchange differences arising on the translation of a foreignoperation are included in cumulative translation reserves withinshareholders’ equity and included in the profit or loss on disposal or partialdisposal of the operation.

Goodwill and fair value adjustments arising on the acquisition of foreignsubsidiaries are maintained in the functional currency of the foreignoperation, translated at the closing rate and are included in hedges of netinvestments where appropriate.

6. Interest, fees and commissionsInterestInterest is recognised in interest income and interest expense in the incomestatement for all interest bearing financial instruments classified as held tomaturity, available for sale or other loans and receivables using the effectiveinterest method.

The effective interest method is a method of calculating the amortisedcost of a financial asset or liability (or group of assets and liabilities) and ofallocating the interest income or interest expense over the relevant period.The effective interest rate is the rate that exactly discounts the expectedfuture cash payments or receipts through the expected life of the financialinstrument, or when appropriate, a shorter period, to the net carryingamount of the instrument. The application of the method has the effect ofrecognising income (and expense) receivable (or payable) on theinstrument evenly in proportion to the amount outstanding over the periodto maturity or repayment.

In calculating effective interest, the Group estimates cash flows (usingprojections based on its experience of customers’ behaviour) considering allcontractual terms of the financial instrument but excluding future creditlosses. Fees, including those for early redemption, are included in thecalculation to the extent that they can be measured and are considered tobe an integral part of the effective interest rate. Cash flows arising from thedirect and incremental costs of issuing financial instruments are also takeninto account in the calculation. Where it is not possible to otherwise estimatereliably the cash flows or the expected life of a financial instrument, effectiveinterest is calculated by reference to the payments or receipts specified inthe contract, and the full contractual term.


Consolidated accounts Barclays Bank PLCAccounting policiescontinued

Fees and commissions Unless included in the effective interest calculation, fees and commissionsare recognised on an accruals basis as the service is provided. Fees andcommissions not integral to effective interest arising from negotiating, orparticipating in the negotiation of a transaction from a third party, such asthe acquisition of loans, shares or other securities or the purchase or sale ofbusinesses, are recognised on completion of the underlying transaction.Portfolio and other management advisory and service fees are recognisedbased on the applicable service contracts. Asset management fees relatedto investment funds are recognised over the period the service is provided.The same principle is applied to the recognition of income from wealthmanagement, financial planning and custody services that are continuouslyprovided over an extended period of time.

Commitment fees, together with related direct costs, for loan facilitieswhere draw down is probable are deferred and recognised as an adjustmentto the effective interest on the loan once drawn. Commitment fees inrelation to facilities where draw down is not probable are recognised over theterm of the commitment.

Insurance premiumsInsurance premiums are recognised in the period earned.

Net trading incomeIncome arises from the margins which are achieved through market-makingand customer business and from changes in market value caused bymovements in interest and exchange rates, equity prices and other marketvariables. Trading positions are held at fair value and the resulting gains andlosses are included in the Income statement, together with interest anddividends arising from long and short positions and funding costs relating totrading activities.

DividendsDividends are recognised when the right to receive payment is established.In the individual financial statements of Barclays Bank PLC, this is when thedividends are received or when the dividends are appropriately authorisedby the subsidiary.

7. Financial assets and liabilities Financial assetsThe Group classifies its financial assets in the following categories: financialinstruments at fair value through profit or loss; loans and receivables; held tomaturity investments and available for sale financial assets. Managementdetermines the classification of financial assets and liabilities at initialrecognition.

Financial instruments at fair value through profit or loss Financial instruments are classified in this category if they are held fortrading, or if they are designated by management under the fair valueoption. Instruments are classified as held for trading if they are:

a) acquired principally for the purposes of selling or repurchasing in the nearterm;

b) part of a portfolio of identified financial instruments that are managedtogether and for which there is evidence of a recent actual pattern ofshort-term profit-taking; or

c) a derivative, except for a derivative that is a financial guarantee contractor a designated and effective hedging instrument.

It is not possible to transfer a financial instrument out of this category whilstit is held or issued, with the exception of non-derivative financial assets heldfor trading which may be transferred out of this category from 1st July 2008after initial classification where:

a) in rare circumstances, it is no longer held for the purpose of selling orrepurchasing in the near term, or

b) it is no longer held for the purpose of trading, it would have met thedefinition of a loan and receivable on initial classification and the Grouphas the intention and ability to hold it for the foreseeable future or untilmaturity.

Financial instruments included in this category are recognised initially at fairvalue and transaction costs are taken directly to the income statement.Gains and losses arising from changes in fair value are included directly inthe income statement.

Regular way purchases and sales of financial instruments held fortrading or designated under the fair value option are recognised on tradedate, being the date on which the Group commits to purchase or sell theasset. The fair value option is used in the following circumstances:

a) financial assets backing insurance contracts and financial assets backinginvestment contracts are designated at fair value through profit or lossbecause the related liabilities have cash flows that are contractuallybased on the performance of the assets or the related liabilities areinsurance contracts whose measurement incorporates currentinformation. Fair valuing the assets through profit and loss significantlyreduces the recognition inconsistencies that would arise if the financialassets were classified as available for sale;

b) financial assets, loans to customers, financial liabilities, financialguarantees and structured notes may be designated at fair value throughprofit or loss if they contain substantive embedded derivatives;

c) financial assets, loans to customers, financial liabilities, financialguarantees and structured notes may be designated at fair value throughprofit or loss where doing so significantly reduces measurementinconsistencies that would arise if the related derivatives were treated asheld for trading and the underlying financial instruments were carried atamortised cost; and

d) certain private equity and other investments that are managed, andevaluated on a fair value basis in accordance with a documented riskmanagement or investment strategy and reported to key managementpersonnel on that basis.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market and whichare not classified as available for sale. Loans and receivables are initiallyrecognised at fair value including direct and incremental transaction costs.They are subsequently valued at amortised cost, using the effective interestmethod (see accounting policy 6).

Regular way purchases and sales of loans and receivables arerecognised on contractual settlement.


Held to maturityHeld to maturity investments are non-derivative financial assets with fixedor determinable payments that the Group’s management has the intentionand ability to hold to maturity. They are initially recognised at fair valueincluding direct and incremental transaction costs. They are subsequentlyvalued at amortised cost, using the effective interest method (seeaccounting policy 6).

Regular way purchases of held to maturity financial assets arerecognised on trade date, being the date on which the Group commits topurchase the asset.

Available for saleAvailable for sale assets are non-derivative financial assets that aredesignated as available for sale and are not categorised into any of the othercategories described above. They are initially recognised at fair valueincluding direct and incremental transaction costs. They are subsequentlyheld at fair value. Gains and losses arising from changes in fair value areincluded as a separate component of equity until sale when the cumulativegain or loss is transferred to the income statement. Interest determinedusing the effective interest method (see accounting policy 6), impairmentlosses and translation differences on monetary items are recognised in theincome statement.

Regular way purchases and sales of available for sale financialinstruments are recognised on trade date, being the date on which theGroup commits to purchase or sell the asset.

A financial asset classified as available for sale that would have met thedefinition of loans and receivables may only be transferred from the availablefor sale classification where the Group has the intention and the ability tohold the asset for the foreseeable future or until maturity.

Embedded derivativesSome hybrid contracts contain both a derivative and a non-derivativecomponent. In such cases, the derivative component is termed anembedded derivative. Where the economic characteristics and risks of theembedded derivatives are not closely related to those of the host contract,and the host contract itself is not carried at fair value through profit or loss,the embedded derivative is bifurcated and reported at fair value with gainsand losses being recognised in the income statement.

Profits or losses cannot be recognised on the initial recognition ofembedded derivatives unless the host contract is also carried at fair value.

Derecognition of financial assetsThe Group derecognises a financial asset, or a portion of a financial asset,where the contractual rights to that asset have expired. Derecognition is alsoappropriate where the rights to further cash flows from the asset have beentransferred to a third party and, with them, either:

(i) substantially all the risks and rewards of the asset; or

(ii) significant risks and rewards, along with the unconditional ability to sellor pledge the asset.

Where significant risks and rewards have been transferred, but thetransferee does not have the unconditional ability to sell or pledge the asset,the Group continues to account for the asset to the extent of its continuinginvolvement (‘continuing involvement accounting’).

To assess the extent to which risks and rewards have been transferred, it is often necessary to perform a quantitative analysis. Such an analysis willcompare the Group’s exposure to variability in asset cash flows before thetransfer with its retained exposure after the transfer.

Where neither derecognition nor continuing involvement accounting is appropriate, the Group continues to recognise the asset in its entirety and recognises any consideration received as a financial liability.

Loan commitmentsLoan commitments, where the Group has a past practice of selling theresulting assets shortly after origination, are held at fair value through profitor loss. Other loan commitments are accounted for in accordance withpolicy 23.

Financial liabilitiesFinancial liabilities are measured at amortised cost, except for tradingliabilities and liabilities designated at fair value, which are held at fair valuethrough profit or loss. Financial liabilities are derecognised whenextinguished.

An exchange of an existing debt instrument for a new instrument withthe lender on substantially different terms is accounted for as anextinguishment of the original financial liability and the recognition of a newfinancial liability. An assessment is made as to whether the terms aresubstantially different considering qualitative and quantitive characteristics.For example, if the discounted present value calculated using the originaleffective interest rate of the cash flows under the new terms, including fees,is at least 10 per cent different from the discounted present value of theremaining cash flows of the original financial liability, or if the qualitativeassessment concludes that the nature and risk profile of the originalfinancial liability is materially different from that of the new financial liabilitybased on the terms of the instruments including repayment terms, couponterms and call options, the original financial liability is extinguished.

When an exchange is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on theextinguishment. The difference between the carrying amount of a financialliability extinguished or transferred to another party and the considerationpaid, including any non-cash assets transferred or liabilities assumed, isrecognised in profit or loss.

Determining fair valueWhere the classification of a financial instrument requires it to be stated atfair value, fair value is determined by reference to a quoted market price forthat instrument or by using a valuation model. Where the fair value iscalculated by using valuation models, the methodology is to calculate theexpected cash flows under the terms of each specific contract and thendiscount these values back to a present value. These models use as theirbasis independently sourced market parameters including, for example,interest rate yield curves, equities and commodities prices, option volatilitiesand currency rates. For financial liabilities measured at fair value, thecarrying amount is adjusted to reflect the effect on fair value of changes inown credit spreads by applying the appropriate Barclays credit default swapspreads. Most market parameters are either directly observable or areimplied from instrument prices. The model may perform numericalprocedures in the pricing such as interpolation when input values do notdirectly correspond to the most actively traded market trade parameters.However, where valuations include significant unobservable inputs, thetransaction price is deemed to provide the best evidence of initial fair valuefor accounting purposes. As such, profits or losses are recognised upontrade inception only when such profits can be measured solely by referenceto observable market data. For valuations that include significantunobservable inputs, the difference between the model valuation and theinitial transaction price is recognised in profit or loss:

a) on a straight-line basis over the term of the transaction, or over the perioduntil all model inputs will become observable where appropriate or;

b) released in full where previously unobservable inputs becomeobservable.

Various factors influence the availability of observable inputs and these mayvary from product to product and change over time. Factors include forexample, the depth of activity in the relevant market, the type of product,whether the product is new and not widely traded in the market place, thematurity of market modelling, the nature of the transaction (bespoke orgeneric). To the extent that valuation is based on models or inputs that arenot observable in the market, the determination of fair value requires can bemore subjective, dependant on the significance of the unobservable input tothe overall valuation. Unobservable inputs are determined based on the bestinformation available, for example by reference to similar assets, similarmaturities or other analytical techniques.



8. Impairment of financial assetsThe Group assesses at each balance sheet date whether there is objectiveevidence that loans and receivables or available for sale financialinvestments are impaired. These are impaired and impairment losses areincurred if, and only if, there is objective evidence of impairment as a result ofone or more loss events that occurred after the initial recognition of theasset and prior to the balance sheet date (‘a loss event’) and that loss eventor events has had an impact on the estimated future cash flows of thefinancial asset or the portfolio that can be reliably estimated. The criteriathat the Group uses to determine that there is objective evidence of animpairment loss include:

a) significant financial difficulty of the issuer or obligor;

b) a breach of contract, such as a default or delinquency in interest orprincipal payments;

c) the lender, for economic or legal reasons relating to the borrower’sfinancial difficulty, granting to the borrower a concession that the lenderwould not otherwise consider;

d) it becomes probable that the borrower will enter bankruptcy or otherfinancial reorganisation;

e) the disappearance of an active market for that financial asset because offinancial difficulties; or

f) observable data indicating that there is a measurable decrease in theestimated future cash flows from a portfolio of financial assets since theinitial recognition of those assets, although the decrease cannot yet beidentified with the individual financial assets in the portfolio, including:

(i) adverse changes in the payment status of borrowers in theportfolio;

(ii)national or local economic conditions that correlate with defaultson the assets in the portfolio.

For loans and receivables the Group first assesses whether objectiveevidence of impairment exists individually for loans and receivables that areindividually significant, and individually or collectively for loans andreceivables that are not individually significant. If the Group determines thatno objective evidence of impairment exists for an individually assessed loanand receivable, whether significant or not, it includes the asset in a group ofloans and receivables with similar credit risk characteristics and collectivelyassesses them for impairment. Loans and receivables that are individuallyassessed for impairment and for which an impairment loss is or continues tobe recognised are not included in a collective assessment of impairment.

The amount of impairment loss is measured as the difference betweenthe asset’s carrying amount and the present value of estimated future cashflows discounted at the asset’s original effective interest rate. The amount ofthe loss is recognised using an allowance account and recognised in theincome statement.

Where appropriate, the calculation of the present value of the estimatedfuture cash flows of a collateralised loan and receivable asset reflect the cash

flows that may result from foreclosure costs for obtaining and selling thecollateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, loans andreceivables are grouped on the basis of similar risk characteristics, takinginto account asset type, industry, geographical location, collateral type, past-due status and other relevant factors. These characteristics are relevant tothe estimation of future cash flows for groups of such assets by beingindicative of the counterparty’s ability to pay all amounts due according tothe contractual terms of the assets being evaluated.

Future cash flows in a group of loans and receivables that are collectivelyevaluated for impairment are estimated on the basis of the contractual cashflows of the assets in the group and historical loss experience for assets withcredit risk characteristics similar to those in the group. Historical lossexperience is adjusted based on current observable data to reflect theeffects of current conditions that did not affect the period on which thehistorical loss experience is based and to remove the effects of conditions inthe historical period that do not currently exist.

The methodology and assumptions used for estimating future cashflows are reviewed regularly to reduce any differences between lossestimates and actual loss experience.

Following impairment, interest income is recognised using the effectiverate of interest which was used to discount the future cash flows for thepurpose of measuring the impairment loss.

When a loan is uncollectable, it is written off against the relatedallowance for loan impairment. Such loans are written off after all thenecessary procedures have been completed and the amount of the loss hasbeen determined. Subsequent recoveries of amounts previously written offare credited to the income statement.

If, in a subsequent period, the amount of the impairment loss decreasesand the decrease can be related objectively to an event occurring after theimpairment was recognised, the previously recognised impairment loss isreversed by adjusting the allowance account. The amount of the reversal isrecognised in the income statement.

Equity securities or properties acquired in exchange for loans in order toachieve an orderly realisation are accounted for as a disposal of the loan andan acquisition of equity securities or investment properties. Where control isobtained over an entity as a result of the transaction, the entity isconsolidated. Any further impairment of the assets or business acquired istreated as an impairment of the relevant asset or business and not as animpairment of the original instrument.

In the case of available for sale equity securities, a significant orprolonged decline in the fair value of the security below its cost is alsoconsidered in determining whether impairment exists. Where such evidenceexists, the cumulative net loss that has been previously recognised directlyin equity is removed from equity and recognised in the income statement. Inthe case of debt instruments classified as available for sale, impairment isassessed based on the same criteria as all other financial assets. Reversals ofimpairment of debt instruments are recognised in the income statement.Reversals of impairment of equity shares are not recognised in the incomestatement, increases in the fair value of equity shares after impairment arerecognised directly in equity.


9. Sale and repurchase agreements (including stock borrowing and lending)Securities may be lent or sold subject to a commitment to repurchase them(a ‘repo’). Such securities are retained on the balance sheet whensubstantially all the risks and rewards of ownership remain with the Group,and the counterparty liability is included separately on the balance sheetwhen cash consideration is received.

Similarly, where the Group borrows or purchases securities subject to acommitment to resell them (a ‘reverse repo’) but does not acquire the risksand rewards of ownership, the transactions are treated as collateralisedloans when cash consideration is paid, and the securities are not included inthe balance sheet.

The difference between sale and repurchase price is accrued over thelife of the agreements using the effective interest method. Securities lent tocounterparties are also retained in the financial statements. Securitiesborrowed are not recognised in the financial statements, unless these aresold to third parties, at which point the obligation to repurchase thesecurities is recorded as a trading liability at fair value and any subsequentgain or loss included in net trading income.

10. Securitisation transactionsThe Group enters into securitisation transactions in respect of its ownfinancial assets and to facilitate client transactions as described in Note 28 to the accounts.

All financial assets continue to be held on the Group balance sheet, anda liability recognised for the proceeds of the funding transaction, unless:

a) substantially all the risks and rewards associated with the financialinstruments have been transferred, in which case, the assets arederecognised in full; or

b) if a significant portion, but not all, of the risks and rewards have beentransferred, the asset is derecognised entirely if the transferee has theability to sell the financial asset, otherwise the asset continues to berecognised only to the extent of the Group’s continuing involvement.

Where a) or b) above applies to a fully proportionate share of all orspecifically identified cash flows, the relevant accounting treatment isapplied to that proportion of the asset.

11. Collateral and nettingThe Group enters into master agreements with counterparties wheneverpossible and, when appropriate, obtains collateral. Master agreementsprovide that, if an event of default occurs, all outstanding transactions withthe counterparty will fall due and all amounts outstanding will be settled ona net basis.

CollateralThe Group obtains collateral in respect of customer liabilities where this isconsidered appropriate. The collateral normally takes the form of a lien overthe customer’s assets and gives the Group a claim on these assets for bothexisting and future customer liabilities.

The Group also receives collateral in the form of cash or securities inrespect of other credit instruments, such as stock borrowing contracts, andderivative contracts in order to reduce credit risk. Collateral received in theform of securities is not recorded on the balance sheet. Collateral received in

the form of cash is recorded on the balance sheet with a correspondingliability. These items are assigned to deposits received from bank or othercounterparties. Any interest payable or receivable arising is recorded asinterest expense or interest income respectively except for funding costsrelating to trading activities which are recorded in net trading income.

NettingFinancial assets and liabilities are offset and the net amount reported in thebalance sheet if, and only if, there is a legally enforceable right to set off therecognised amounts and there is an intention to settle on a net basis, or torealise an asset and settle the liability simultaneously. In many cases, eventhough master netting agreements are in place, the lack of an intention tosettle on a net basis results in the related assets and liabilities beingpresented gross in the balance sheet.

12. Hedge accountingDerivatives are used to hedge interest rate, exchange rate, commodity, andequity exposures and exposures to certain indices such as house priceindices and retail price indices related to non-trading positions.

Where derivatives are held for risk management purposes, and whentransactions meet the required criteria, the Group applies fair value hedgeaccounting, cash flow hedge accounting, or hedging of a net investment in aforeign operation as appropriate to the risks being hedged.

When a financial instrument is designated as a hedge, the Groupformally documents the relationship between the hedging instrument andhedged item as well as its risk management objectives and its strategy forundertaking the various hedging transactions. The Group also documentsits assessment, both at hedge inception and on an ongoing basis, ofwhether the derivatives that are used in hedging transactions are highlyeffective in offsetting changes in fair values or cash flows of hedged items.

The Group discontinues hedge accounting when:

a) It is determined that a derivative is not, or has ceased to be, highlyeffective as a hedge;

b) the derivative expires, or is sold, terminated, or exercised;

c) the hedged item matures or is sold or repaid; or

d) a forecast transaction is no longer deemed highly probable.

In certain circumstances, the Group may decide to cease hedge accountingeven though the hedge relationship continues to be highly effective by nolonger designating the financial instrument as a hedging instrument. To theextent that the changes in the fair value of the hedging derivative differ fromchanges in the fair value of the hedged risk in the hedged item; or thecumulative change in the fair value of the hedging derivative differs from thecumulative change in the fair value of expected future cash flows of thehedged item, the hedge is deemed to include ineffectiveness. The amountof ineffectiveness, provided it is not so great as to disqualify the entire hedgefor hedge accounting, is recorded in the income statement.

Fair value hedge accountingChanges in fair value of derivatives that qualify and are designated as fairvalue hedges are recorded in the income statement, together with changesin the fair value of the hedged asset or liability that are attributable to thehedged risk.



If the hedge relationship no longer meets the criteria for hedgeaccounting, it is discontinued. For fair value hedges of interest rate risk, thefair value adjustment to the hedged item is amortised to the incomestatement over the period to maturity of the previously designated hedgerelationship using the effective interest method.

If the hedged item is sold or repaid, the unamortised fair valueadjustment is recognised immediately in the income statement.

Cash flow hedgesFor qualifying cash flow hedges, the fair value gain or loss associated withthe effective portion of the cash flow hedge is recognised initially inshareholders’ equity, and recycled to the income statement in the periodswhen the hedged item will affect profit or loss. Any ineffective portion of thegain or loss on the hedging instrument is recognised in the incomestatement immediately.

When a hedging instrument expires or is sold, or when a hedge nolonger meets the criteria for hedge accounting, any cumulative gain or lossexisting in equity at that time remains in equity and is recognised when thehedged item is ultimately recognised in the income statement. When aforecast transaction is no longer expected to occur, the cumulative gain orloss that was recognised in equity is immediately transferred to the incomestatement.

Hedges of net investmentsHedges of net investments in foreign operations, including monetary itemsthat are accounted for as part of the net investment, are accounted forsimilarly to cash flow hedges; the effective portion of the gain or loss on thehedging instrument is recognised directly in equity and the ineffectiveportion is recognised immediately in the income statement. The cumulativegain or loss previously recognised in equity is recognised in the incomestatement on the disposal or partial disposal of the foreign operation.

Hedges of net investments may include non-derivative liabilities as wellas derivative financial instruments although for a non-derivative liability onlythe foreign exchange risk is designated as a hedge.

Derivatives that do not qualify for hedge accountingDerivative contracts entered into as economic hedges that do not qualify forhedge accounting are held at fair value through profit or loss.

13. Property, plant and equipmentProperty and equipment is stated at cost less accumulated depreciation andprovisions for impairment, if any. Additions and subsequent expendituresare capitalised only to the extent that they enhance the future economicbenefits expected to be derived from the assets.

Depreciation is provided on the depreciable amount of items of propertyand equipment on a straight-line basis over their estimated useful economiclives. The depreciable amount is the gross carrying amount, less theestimated residual value at the end of its useful economic life.

The Group uses the following annual rates in calculating depreciation:

Freehold buildings and long-leasehold property(more than 50 years to run) 2-3.3%Leasehold property Over the remaining(less than 50 years to run) life of the leaseCosts of adaptation of freehold and leasehold property a 7-10%Equipment installed in freehold andleasehold property a 7-10%Computers and similar equipment 20-33%Fixtures and fittings and other equipment 10-20%

Depreciation rates, methods and the residual values underlying thecalculation of depreciation of items of property, plant and equipment arekept under review to take account of any change in circumstances.

When deciding on depreciation rates and methods, the principal factorsthe Group takes into account are the expected rate of technologicaldevelopments and expected market requirements for, and the expectedpattern of usage of, the assets. When reviewing residual values, the Groupestimates the amount that it would currently obtain for the disposal of theasset after deducting the estimated cost of disposal if the asset were alreadyof the age and condition expected at the end of its useful economic life.

No depreciation is provided on freehold land, although, in common withall long-lived assets, it is subject to impairment testing, if deemedappropriate.

Gains and losses on disposals are determined by comparing theproceeds with the carrying amount and are recognised in the incomestatement.

Investment property is property held to earn rentals or for capitalappreciation or for both rather than for sale or use in the business. TheGroup initially recognises investment properties at cost, and subsequently attheir fair value at each balance sheet date reflecting market conditions at thereporting date. The fair value of investment property is determined byreference to current market prices for similar properties, adjusted asnecessary for condition and location, or by reference to recent transactionsupdated to reflect current economic conditions. Discounted cash flowtechniques may be employed to calculate fair value where there have beenno recent transactions, using current external market inputs such as marketrents and interest rates. Valuations are carried out by management with thesupport of appropriately qualified independent valuers.

Movements in fair value subsequent to initial recognition are included inthe income statement. No depreciation is provided in respect of investmentproperties.

14. Intangible assetsGoodwillGoodwill arises on the acquisition of subsidiaries, associates and jointventures, and represents the excess of the fair value of the purchaseconsideration and direct costs of making the acquisition, over the fair valueof the Group’s share of the assets acquired, and the liabilities and contingentliabilities assumed on the date of the acquisition.

For the purpose of calculating goodwill, fair values of acquired assets,liabilities and contingent liabilities are determined by reference to marketvalues or other valuation methodologies including discounted cash flowtechniques using market rates or by using risk-free rates and risk-adjustedexpected future cash flows. Goodwill is capitalised and reviewed annually forimpairment, or more frequently when there are indications that impairmentmay have occurred. Goodwill is allocated to cash-generating units for thepurpose of impairment testing. Goodwill on acquisitions of associates andjoint ventures is included in the amount of the investment. Gains and losseson the disposal of an entity include the carrying amount of the goodwillrelating to the entity sold.

Computer softwareComputer software is stated at cost, less amortisation and provisions forimpairment, if any.

The identifiable and directly associated external and internal costs ofacquiring and developing software are capitalised where the software iscontrolled by the Group, and where it is probable that future economicbenefits that exceed its cost will flow from its use over more than one year.Costs associated with maintaining software are recognised as an expensewhen incurred.

Capitalised computer software is amortised over three to five years.

Notea Where leasehold property has a remaining useful life of less than 15 years, costs of

adaptation and installed equipment are depreciated over the remaining life of the lease.


Other intangible assetsOther intangible assets consist of brands, customer lists, licences and othercontracts, core deposit intangibles, mortgage servicing rights and customerrelationships. Other intangible assets are initially recognised when they areseparable or arise from contractual or other legal rights, the cost can bemeasured reliably and, in the case of intangible assets not acquired in abusiness combination, where it is probable that future economic benefitsattributable to the assets will flow from their use. The value of intangibleassets which are acquired in a business combination is generally determinedusing income approach methodologies such as the discounted cash flowmethod and the relief from royalty method that estimate net cash flowsattributable to an asset over its economic life and discount to present valueusing an appropriate rate of return based on the cost of equity adjusted forrisk.

Other intangible assets are stated at cost less amortisation andprovisions for impairment, if any, and are amortised over their useful lives in amanner that reflects the pattern to which they contribute to future cashflows, generally over 4-25 years.

15. Impairment of property, plant and equipment and intangible assetsAt each balance sheet date, or more frequently where events or changes incircumstances dictate, property, plant and equipment and intangible assets,are assessed for indications of impairment. If indications are present, theseassets are subject to an impairment review. Goodwill is subject to animpairment review as at the balance sheet date each year. The impairmentreview comprises a comparison of the carrying amount of the asset with itsrecoverable amount: the higher of the asset’s or the cash-generating unit’sfair value less costs to sell and its value in use. Fair value less costs to sell iscalculated by reference to the amount at which the asset could be disposedof in a binding sale agreement in an arm’s length transaction evidenced byan active market or recent transactions for similar assets. Value in use iscalculated by discounting the expected future cash flows obtainable as aresult of the asset’s continued use, including those resulting from itsultimate disposal, at a market-based discount rate on a pre-tax basis.

The carrying values of fixed assets and goodwill are written down by theamount of any impairment and this loss is recognised in the incomestatement in the period in which it occurs. A previously recognisedimpairment loss relating to a fixed asset may be reversed in part or in fullwhen a change in circumstances leads to a change in the estimates used todetermine the fixed asset’s recoverable amount. The carrying amount of thefixed asset will only be increased up to the amount that it would have beenhad the original impairment not been recognised. Impairment losses ongoodwill are not reversed. For the purpose of conducting impairmentreviews, cash-generating units are the lowest level at which managementmonitors the return on investment on assets.

16. Financial guaranteesFinancial guarantee contracts are contracts that require the issuer to makespecified payments to reimburse the holder for a loss it incurs because aspecified debtor fails to make payments when due in accordance with theterms of a debt instrument.

Financial guarantees are initially recognised in the financial statementsat fair value on the date that the guarantee was given. Other than where thefair value option is applied, subsequent to initial recognition, the Group’sliabilities under such guarantees are measured at the higher of the initialmeasurement, less amortisation calculated to recognise in the incomestatement any fee income earned over the period, and the best estimate ofthe expenditure required to settle any financial obligation arising as a resultof the guarantees at the balance sheet date, in accordance with policy 23.

Any increase in the liability relating to guarantees is taken to the incomestatement in Provisions for undrawn contractually committed facilities andguarantees provided. Any liability remaining is recognised in the incomestatement when the guarantee is discharged, cancelled or expires.

17. Issued debt and equity securitiesIssued financial instruments or their components are classified as liabilitieswhere the contractual arrangement results in the Group having a presentobligation to either deliver cash or another financial asset to the holder, toexchange financial instruments on terms that are potentially unfavourable orto satisfy the obligation otherwise than by the exchange of a fixed amount ofcash or another financial asset for a fixed number of equity shares. Issuedfinancial instruments, or their components, are classified as equity wherethey meet the definition of equity and confer on the holder a residual interestin the assets of the Group. The components of issued financial instrumentsthat contain both liability and equity elements are accounted for separatelywith the equity component being assigned the residual amount afterdeducting from the instrument as a whole the amount separatelydetermined as the fair value of the liability component.

Financial liabilities, other than trading liabilities and financial liabilitiesdesignated at fair value, are carried at amortised cost using the effectiveinterest method as set out in policy 6. Derivatives embedded in financialliabilities that are not designated at fair value are accounted for as set out inpolicy 7. Equity instruments, including share capital, are initially recognisedat net proceeds, after deducting transaction costs and any related incometax. Dividend and other payments to equity holders are deducted fromequity, net of any related tax.

18. Share capitalShare issue costsIncremental costs directly attributable to the issue of new shares or optionsincluding those issued on the acquisition of a business are shown in equityas a deduction, net of tax, from the proceeds.

Dividends on ordinary sharesDividends on ordinary shares are recognised in equity in the period in whichthey are paid or, if earlier, approved by the Barclays Bank PLC (the Bank)shareholders.

19. Insurance contracts and investment contractsThe Group offers wealth management, term assurance, annuity, propertyand payment protection insurance products to customers that take the formof long- and short-term insurance contracts.

The Group classifies its wealth management and other products asinsurance contracts where these transfer significant insurance risk,generally where the benefits payable on the occurrence of an insured eventare at least 5% more than the benefits that would be payable if the insuredevent does not occur.

Contracts that do not contain significant insurance risk or discretionaryparticipation features are classified as investment contracts. Financial assetsand liabilities relating to investment contracts, and assets backing insurancecontracts are classified and measured as appropriate under IAS 39,‘Financial Instruments: Recognition and Measurement’.

Long-term insurance contracts These contracts, insure events associated with human life (for example,death or survival) over a long duration. Premiums are recognised asrevenue when they become payable by the contract holder. Claims andsurrenders are accounted for when notified. Maturities on the policymaturity date and regular withdrawals are accounted for when due.

A liability for contractual benefits that are expected to be incurred inthe future is recorded when the premiums are recognised, based on theexpected discounted value of the benefit payments and directly relatedadministration costs, less the expected discounted value of the futurepremiums that would be required to meet the benefits and otherexpenses. The calculation of the liability contains assumptions regardingmortality, maintenance expenses and investment income.

Liabilities under unit-linked life insurance contracts (such asendowment policies) in addition reflect the value of assets held withinunitised investment pools.



Short-term insurance contractsUnder its payment protection insurance products the Group is committed topaying benefits to the policyholder rather than forgiving interest or principalon the occurrence of an insured event, such as unemployment, sickness, orinjury. Property insurance contracts mainly compensate the policyholdersfor damage to their property or for the value of property lost.

Premiums are recognised as revenue proportionally over the period ofthe coverage. Claims and claims handling costs are charged to income asincurred, based on the estimated liability for compensation owed topolicyholders arising from events that have occurred up to the balance sheetdate even if they have not yet been reported to the Group, based onassessments of individual cases reported to the Group and statisticalanalyses for the claims incurred but not reported.

Deferred acquisition costs (DAC)Commissions and other costs that are related to securing new insuranceand investment contracts are capitalised and amortised over the estimatedlives of the relevant contracts.

Deferred income liabilityFees that are designed to recover commissions and other costs related toeither securing new insurance and investment contracts or renewingexisting investment contracts are included as a liability and amortised overthe estimated life of the contract.

Value of business acquiredOn acquisition of a portfolio of contracts, such as through the acquisition ofa subsidiary, the Group recognises an intangible asset representing thevalue of business acquired (VOBA), representing the future profitsembedded in acquired insurance contracts and investment contracts with adiscretionary participation feature. The asset is amortised over theremaining terms of the acquired contracts.

Liability adequacy testLiability adequacy tests are performed at each balance sheet date to ensurethe adequacy of contract liabilities net of DAC and VOBA assets. Current bestestimates of future contractual cash flows, claims handling andadministration costs, and investment returns from the assets backing theliabilities are taken into account in the tests. Where a deficiency ishighlighted by the test, DAC and VOBA assets are written off first, andinsurance liabilities increased when these are written off in full. Anydeficiency is immediately recognised in the income statement.

ReinsuranceShort- and long-term insurance business is ceded to reinsurers undercontracts to transfer part or all of one or more of the following risks:mortality, investment and expenses. All such contracts are dealt with asinsurance contracts. The benefits to which the Group is entitled under itsreinsurance contracts are recognised as reinsurance assets. The Groupassesses reinsurance assets at each balance sheet date. If there is objectiveevidence of impairment, the carrying amount of the reinsurance asset isreduced accordingly resulting in a charge to the income statement.

20. LeasesLessorAssets leased to customers under agreements, which transfer substantiallyall the risks and rewards of ownership, with or without ultimate legal title, are

classified as finance leases. When assets are held subject to a finance lease,the present value of the lease payments, discounted at the rate of interestimplicit in the lease, is recognised as a receivable. The difference betweenthe total payments receivable under the lease and the present value of thereceivable is recognised as unearned finance income, which is allocated toaccounting periods under the pre-tax net investment method to reflect aconstant periodic rate of return.

Assets leased to customers under agreements which do not transfersubstantially all the risks and rewards of ownership are classified asoperating leases. The leased assets are included within property, plant andequipment on the Group’s balance sheet and depreciation is provided on thedepreciable amount of these assets on a systematic basis over theirestimated useful lives. Lease income is recognised on a straight-line basisover the period of the lease unless another systematic basis is moreappropriate.

LesseeThe leases entered into by the Group are primarily operating leases.Operating lease rentals payable are recognised as an expense in the incomestatement on a straight-line basis over the lease term unless anothersystematic basis is more appropriate.

21. Employee benefitsThe Group provides employees worldwide with post-retirement benefitsmainly in the form of pensions. The Group operates a number of pensionschemes which may be funded or unfunded and of a defined contribution ordefined benefit nature. In addition, the Group contributes, according to locallaw in the various countries in which it operates, to Governmental and otherplans which have the characteristics of defined contribution plans.

For defined benefit schemes, actuarial valuation of each of the scheme’sobligations using the projected unit credit method and the fair valuation ofeach of the scheme’s assets are performed annually, using the assumptionsset out in Note 29. The difference between the fair value of the plan assetsand the present value of the defined benefit obligation at the balance sheetdate, adjusted for any historic unrecognised actuarial gains or losses andpast service cost, is recognised as a liability in the balance sheet. An asset,arising for example, as a result of past over funding or the performance ofthe plan investments, is recognised to the extent that it does not exceed thepresent value of future contribution holidays or refunds of contributions.

Gains and losses on curtailments are recognised when the curtailmentoccurs which is when there is a demonstrable commitment to make asignificant reduction in the number of employees covered by the plan oramendments have been made to the terms of the plan so that a significantelement of future service will no longer qualify for benefits or will qualify onlyfor reduced benefits. The gain or loss comprises any resulting change in thepresent value of the defined benefit obligation, any resulting change in thefair value of the plan assets and any related actuarial gain or loss that hadnot previously been recognised since they fell within the corridor.

Cumulative actuarial gains and losses in excess of the greater of 10% ofthe assets or 10% of the obligations of the plan (‘the corridor’)arerecognised in the income statement over the remaining average service livesof the employees of the related plan, on a straight-line basis.

For defined contribution schemes, the Group recognises contributionsdue in respect of the accounting period in the income statement. Anycontributions unpaid at the balance sheet date are included as a liability.


The Group also provides health care to certain retired employees, whichare accrued as a liability in the financial statements over the period ofemployment, using a methodology similar to that for defined benefitpensions plans.

Short-term employee benefits, such as salaries, paid absences, andother benefits including any related payroll taxes are accounted for on anaccruals basis over the period in which the employees provide the relatedservices in the year. Bonuses are recognised to the extent that the Group hasa present obligation to its employees that can be measured reliably.

All expenses related to employee benefits are recognised in the incomestatement in staff costs, which is included within operating expenses.

22. Share-based payments to employeesThe Group engages in equity settled share-based payment transactions inrespect of services received from certain of its employees. The fair value ofthe services received is measured by reference to the fair value of the sharesor share options granted on the date of the grant. The cost of the employeeservices received in respect of the shares or share options granted isrecognised in the income statement over the period that the services arereceived, which is the vesting period. The fair value of the options granted isdetermined using option pricing models, which take into account theexercise price of the option, the current share price, the risk free interest rate,the expected volatility of the share price over the life of the option and otherrelevant factors. Except for those which include terms related to marketconditions, vesting conditions, which are service conditions or performanceconditions included in the terms of the grant are not taken into account inestimating fair value. Non-market vesting conditions are taken into accountby adjusting the number of shares or share options included in themeasurement of the cost of employee services so that ultimately, theamount recognised in the income statement reflects the number of vestedshares or share options. Where vesting conditions are related to marketconditions, the charges for the services received are recognised regardlessof whether or not the market related vesting condition is met, provided thatthe non-market vesting conditions are met. Similarly, non-vestingconditions, which are other conditions not being service conditions orperformance conditions, are taken into account in estimating the grant datefair value and share based payment charges and are recognised when allnon-market vesting conditions are satisfied irrespective of whether the non-vesting conditions are satisfied. If meeting a non-vesting condition is amatter of choice, failure to meet the non-vesting condition is treated as acancellation, resulting in an acceleration of recognition of the cost of theemployee services.

23. ProvisionsProvisions are recognised for present obligations arising as consequences ofpast events where it is more likely than not that a transfer of economicbenefit will be necessary to settle the obligation, and it can be reliablyestimated.

When a leasehold property ceases to be used in the business or ademonstrable commitment has been made to cease to use a propertywhere the costs exceed the benefits of the property, provision is made,where the unavoidable costs of the future obligations relating to the leaseare expected to exceed anticipated rental income and other benefits. The netcosts are discounted using market rates of interest to reflect the long-termnature of the cash flows.

Provision is made for the anticipated cost of restructuring, includingredundancy costs when an obligation exists. An obligation exists when theGroup has a detailed formal plan for restructuring a business and has raisedvalid expectations in those affected by the restructuring by starting toimplement the plan or announcing its main features. The provision raised isnormally utilised within nine months.

Provision is made for undrawn loan commitments and similar facilities ifit is probable that the facility will be drawn and result in recognition of anasset at an amount less than the amount advanced.

Contingent liabilities are possible obligations whose existence will beconfirmed only by uncertain future events or present obligations where thetransfer of economic benefit is uncertain or cannot be reliably measured.Contingent liabilities are not recognised but are disclosed unless they areremote.

24. Taxes, including deferred taxesIncome tax payable on taxable profits (‘current tax’), is recognised as anexpense in the period in which the profits arise. Income tax recoverable ontax allowable losses is recognised as an asset only to the extent that it isregarded as recoverable by offset against current or future taxable profits.

Deferred income tax is provided in full, using the liability method, ontemporary differences arising from the differences between the tax bases ofassets and liabilities and their carrying amounts in the consolidated financialstatements. Deferred income tax is determined using tax rates andlegislation enacted or substantially enacted by the balance sheet date thatare expected to apply when the deferred tax asset is realised or the deferredtax liability is settled. Deferred and current tax assets and liabilities are onlyoffset when they arise in the same tax reporting group and where there isboth the legal right and the intention to settle on a net basis or to realise theasset and settle the liability simultaneously.

25. Segment reportingOperating segments are reported in a manner consistent with the internalreporting provided to the Executive Committee. The Executive Committee,which is responsible for allocating resources and assessing performance ofthe operating segments, has been identified as the chief operating decisionmaker.

All transactions between business segments are conducted on an arm’slength basis, with intra-segment revenue and costs being eliminated inHead office. Income and expenses directly associated with each segmentare included in determining business segment performance.

26. Cash and cash equivalentsFor the purposes of the cash flow statement, cash comprises cash on handand demand deposits, and cash equivalents comprise highly liquidinvestments that are convertible into cash with an insignificant risk ofchanges in value with original maturities of less than three months.Repurchase and reverse repurchase agreements are not considered to bepart of cash equivalents.

27. Trust activitiesThe Group commonly acts as trustees and in other fiduciary capacities thatresult in the holding or placing of assets on behalf of individuals, trusts,retirement benefit plans and other institutions. These assets and incomearising thereon are excluded from these financial statements, as they are notassets of the Group.


Consolidated accounts Barclays Bank PLCAccounting developments

Until future acquisitions take place that are accounted for in accordancewith the revised IFRS 3, the main impact on Barclays will be that, from2010, gains and losses on transactions with non-controlling interests thatdo not result in loss of control will no longer be recognised in the incomestatement but directly in equity. In 2009, gains of £3m were recognised inincome relating to such transactions.

The following standards and amendments to existing standards have beenpublished and are mandatory for the Group’s accounting periods beginningon or after 1 January 2010 or later periods, but have not been adopted. Theyare not expected to result in significant changes to the Group’s accountingpolicies.

– Embedded derivatives: Amendments to IFRIC 9 and IAS 39

– Group cash-settled share-based payment transactions: Amendments to IFRS 2

– Eligible Hedged Items (an amendment to IAS 39)

– IFRS classification of rights issues: Amendment to IAS 32

– IAS 24 Related Party Disclosures

– Prepayments and minimum funding requirements (Amendments to IFRIC 14)

– IFRIC 17 – Distribution of non-cash assets to owners

– IFRIC 18 - Transfers of assets from customers

– IFRIC 19 – Extinguishing financial liabilities with equity instruments

– Improvements to IFRS 2008

– Improvements to IFRS 2009

IFRS 9 ‘Financial Instruments: Classification and Measurement’ waspublished on 12th November 2009. It is the first phase of a project to replaceIAS 39 and will ultimately result in fundamental changes in the way that theGroup accounts for financial instruments. Adoption of the standard is notmandatory until accounting periods beginning on or after 1st January 2013but early adoption is permitted. However, it is not available for adoption inthe EU until it has been endorsed.

Changes to Accounting PolicyThe Group has continued to apply the accounting policies used for the 2008Annual Report and has adopted the following:

– The 2008 amendments to IFRS 2 – Shared-Based Payment-VestingConditions and Cancellations which has led to a change in accounting forshare-based payments to employees. As a result, non-vesting conditionsare taken into account in estimating the grant date fair value and thetiming of recognition of charges. No prior year adjustments have beenmade as the impact on previous years is immaterial

– IFRS 7 – Improving Disclosures about Financial Instruments, anamendment to IFRS 7 – Financial Instruments: Disclosures, which hasresulted in additional disclosures being made regarding liquidity risk andfair value of financial instruments

– IAS 1 – Presentation of Financial Statements (revised), which has resultedin the reformatting of the statement of recognised income and expenseinto a statement of comprehensive income and the addition of astatement of changes in equity. This does not change the recognition,measurement or disclosure of specific transactions and events required byother standards

Future accounting developmentsConsideration will be given during 2010 to the implications, if any, of thefollowing revised standards as follows:

– IFRS 3 – Business Combinations and IAS 27 – Consolidated and SeparateFinancial Statements are revised standards issued in January 2008. Therevised IFRS 3 applies prospectively to business combinations firstaccounted for in accounting periods beginning on or after 1st July 2009and the amendments to IAS 27 apply retrospectively to periods beginningon or after 1st July 2009. The main changes in existing practice resultingfrom the revision to IFRS 3 affect acquisitions that are achieved in stagesand acquisitions where less than 100% of the equity is acquired. Inaddition, acquisition related costs – such as fees paid to advisers – must beaccounted for separately from the business combination, which meansthat they will be recognised as expenses unless they are directly connectedwith the issue of debt or equity securities. The revisions to IAS 27 specifythat changes in a parent’s ownership interest in a subsidiary that do notresult in the loss of control must be accounted for as equity transactions.


The main differences from IAS 39 are as follows:

– All financial assets, except for certain equity investments, would beclassified into two categories:

– amortised cost, where they generate solely payments of interest andprincipal and the business model is to collect contractual cash flows thatrepresent principal and interest; or

– fair value through profit or loss.

– Certain non-trading equity investments would be classified at fair valuethrough profit or loss or fair value though Other comprehensive incomewith dividends recognised in net income.

– Embedded derivatives are no longer considered for bifurcation but areincluded in the assessment of the cash flows for the classification of thefinancial asset as a whole.

– Financial assets which meet the requirements for classification atamortised cost are optionally permitted to be measured at fair value if thateliminates or significantly reduces an accounting mismatch.

– Reclassifications are required if, and only if, there is a change in thebusiness model.

Aspects of financial instrument accounting which will be addressed in futurephases of the project include the accounting for financial liabilities,impairment of amortised cost financial assets and hedge accounting. The Group is assessing the impacts of the first phase in the project, as wellas following developments in the future phases.

Draft BBA Code for Financial Reporting DisclosureIn October 2009, the British Bankers’ Association published a draft Code forFinancial Reporting Disclosure, which was a response to the FSA discussionpaper ‘Enhancing financial reporting disclosure’. The draft Code sets out fivedisclosure principles together with supporting guidance. The five disclosureprinciples are that UK banks will:

– provide high quality, meaningful and decision-useful disclosures;

– review and enhance their financial instrument disclosures for key areasof interest;

– assess the applicability and relevance of good practice recommendationsto their disclosures acknowledging the importance of such guidance;

– seek to enhance the comparability of financial statement disclosuresacross the UK banking sector; and

– clearly differentiate in their annual reports between information that isaudited and information that is unaudited.

Barclays PLC, the Parent Company of Barclays Bank PLC, and other major UKbanks have voluntarily adopted the draft Code in their 2009 Annual Reports.The Barclays PLC 2009 financial statements have therefore been prepared incompliance with the draft Code’s principles and the Group aims to continueto enhance its disclosures in line with developing market practice and areasof focus. Since the disclosures for Barclays Bank PLC are the same asBarclays PLC in this respect, please refer to the Barclays PLC Annual Reportfor the additional items relating to the Code’s adoption. Most signficantly,these are additional information regarding the business model, moreinformation on strategy, critical accounting estimates, risk-relatedinformation and a glossary of terms.


Consolidated accounts Barclays Bank PLCConsolidated income statement

For the year ended 31st December The Group

2009 2008Notes £m £m

Continuing operationsInterest income 2 21,236 28,010Interest expense 2 (9,567) (16,595)

Net interest income 11,669 11,415

Fee and commission income 3 9,946 7,573Fee and commission expense 3 (1,528) (1,082)

Net fee and commission income 8,418 6,491

Net trading income 4 6,994 1,270Net investment income 4 283 680

Principal transactions 7,277 1,950

Net premiums from insurance contracts 5 1,172 1,090Other income 6 1,389 444

Total income 29,925 21,390Net claims and benefits incurred on insurance contracts 5 (831) (237)

Total income net of insurance claims 29,094 21,153Impairment charges and other credit provisions 7 (8,071) (5,419)

Net income 21,023 15,734

Staff costs 8 (9,948) (7,204)Administration and general expenses 9 (5,558) (5,301)Depreciation of property, plant and equipment 22 (759) (606)Amortisation of intangible assets 21 (447) (276)

Operating expenses (16,712) (13,387)

Share of post-tax results of associates and joint ventures 19 34 14Profit on disposal of subsidiaries, associates and joint ventures 38 188 327Gains on acquisitions 40 26 2,406

Profit before tax 4,559 5,094Tax 10 (1,047) (449)

Profit after tax from continuing operations 3,512 4,645

Discontinued operationsProfit after tax for the year from discontinued operations, including gain on disposal 39 6,777 604

Net profit for the year 10,289 5,249

Profit attributable to equity holders of the parent from:Continuing operations 3,228 4,259Discontinued operations 6,765 587

Total 9,993 4,846Profit attributable to non-controlling interests 33 296 403

10,289 5,249

The Board of Directors approved the accounts set out on pages 22 to 164 on 9th March 2010.

The accompanying notes form an integral part of the accounts.

NoteAs permitted by section 408(3) of the Companies Act 2006 an income statement for theparent company has not been presented .


Consolidated accounts Barclays Bank PLCConsolidated statement of comprehensive income

For the year ended 31st December 2009 2008£m £m

The GroupNet profit for the year 10,289 5,249

Other comprehensive income:

Continuing operationsCurrency translation differences (853) 2,233Available for sale financial assets 1,320 (1,577)Cash flow hedges 165 376Other (1) (56)Tax relating to components of other comprehensive income (26) 851

Other comprehensive income for the year, net of tax from continuing operations 605 1,827Other comprehensive income for the year, net of tax from discontinued operations (58) 114

Total comprehensive income for the year 10,836 7,190

Attributable to:Equity holders of the parent 10,286 6,654Non-controlling interests 550 536

10,836 7,190

Income tax relating to each component of other comprehensive income is disclosed in Note 10.


Consolidated accounts Barclays Bank PLCBalance sheet

As at 31st December The Group The Bank

2009 2008 2009 2008Notes £m £m £m £m

AssetsCash and balances at central banks 81,483 30,019 78,447 24,867Items in the course of collection from other banks 1,593 1,695 1,373 1,466Trading portfolio assets 11 151,395 185,646 93,806 116,522Financial assets designated at fair value:– held on own account 12 41,311 54,542 27,645 34,098– held in respect of linked liabilities to customers under investment contracts 12 1,257 66,657 – –Derivative financial instruments 13 416,815 984,802 429,895 1,003,685Loans and advances to banks 14 41,135 47,707 42,963 37,824Loans and advances to customers 14 420,224 461,815 512,128 553,889Available for sale financial investments 15 56,651 65,016 36,574 57,902Reverse repurchase agreements and cash collateral on securities borrowed 16 143,431 130,354 145,433 128,815Other assets 17 6,358 6,302 5,197 4,429Current tax assets 349 389 221 234Investments in associates and joint ventures 19 422 341 164 112Investments in subsidiaries 41 – – 18,796 16,922Goodwill 20 6,232 7,625 3,554 3,574Intangible assets 21 2,563 2,777 627 546Property, plant and equipment 22 5,626 4,674 1,832 1,790Deferred tax assets 18 2,303 2,668 773 867

Total assets 1,379,148 2,053,029 1,399,428 1,987,542

LiabilitiesDeposits from banks 76,446 114,910 90,253 127,551Items in the course of collection due to other banks 1,466 1,635 1,384 1,558Customer accounts 322,455 335,533 444,519 444,844Trading portfolio liabilities 11 51,252 59,474 33,534 39,428Financial liabilities designated at fair value 23 86,202 76,892 83,546 70,658Liabilities to customers under investment contracts 12 1,679 69,183 – –Derivative financial instruments 13 403,416 968,072 418,354 989,097Debt securities in issue 135,902 153,426 82,141 84,899Repurchase agreements and cash collateral on securities lent 16 198,781 182,285 165,195 148,950Other liabilities 24 12,101 12,640 6,423 15,295Current tax liabilities 964 1,215 277 651Insurance contract liabilities, including unit-linked liabilities 25 2,140 2,152 – –Subordinated liabilities 26 25,816 29,842 24,893 29,168Deferred tax liabilities 18 470 304 38 20Provisions 27 590 535 464 390Retirement benefit liabilities 29 769 1,357 576 1,154

Total liabilities 1,320,449 2,009,455 1,351,597 1,953,663

Shareholders’ equityCalled up share capital 30 2,402 2,398 2,402 2,398Share premium account 30 12,092 12,060 12,092 12,060Other reserves 31 1,783 1,723 (106) 371Other shareholders’ equity 32 2,559 2,564 2,623 2,628Retained earnings 31 37,089 22,457 30,820 16,422

Shareholders’ equity excluding non-controlling interests 55,925 41,202 47,831 33,879Non-controlling interests 33 2,774 2,372 – –

Total shareholders’ equity 58,699 43,574 47,831 33,879

Total liabilities and shareholders’ equity 1,379,148 2,053,029 1,399,428 1,987,542

The accompanying notes form an integral part of the accounts.

Marcus AgiusGroup Chairman

John Varley Group Chief Executive

Chris Lucas Group Finance Director


The Group Otherreservesb

Share capital and other Non-and share shareholders’ Retained controlling Totalpremiuma equity earningsc Total interest equity

£m £m £m £m £m £m.

Balance at 1st January 2009 14,458 4,287 22,457 41,202 2,372 43,574Net profit for the year – – 9,993 9,993 296 10,289Other comprehensive income:Currency translation differences – (1,138) – (1,138) 285 (853)Available for sale financial assets – 1,334 – 1,334 (14) 1,320Cash flow hedges – 194 – 194 (29) 165Tax relating to components of other comprehensive income – (209) 171 (38) 12 (26)Other – – (1) (1) – (1)Other comprehensive income net of tax from discontinued operations – (75) 17 (58) – (58)

Total comprehensive income – 106 10,180 10,286 550 10,836

Issue of new ordinary shares 25 – – 25 – 25Equity settled share schemes – – 298 298 – 298Vesting of Barclays PLC shares under share-based payment schemes – – (80) (80) – (80)Capital injection from Barclays PLC – – 4,850 4,850 – 4,850Dividends paid – – (103) (103) (132) (235)Dividends on preference shares and other shareholders’ equity – – (599) (599) – (599)Net increase/decrease in non-controlling interest arising on acquisitions, disposals and capital issuances – – – – (82) (82)Other 11 (51) 86 46 66 112

Balance at 31st December 2009 14,494 4,342 37,089 55,925 2,774 58,699

Balance at 1st January 2008 13,133 2,517 14,222 29,872 1,949 31,821Net profit for the year – – 4,846 4,846 403 5,249Other comprehensive income:Currency translation differences – 2,174 – 2,174 59 2,233Available for sale financial assets – (1,575) – (1,575) (2) (1,577)Cash flow hedges – 271 – 271 105 376Tax relating to components of other comprehensive income – 926 (46) 880 (29) 851Other – – (56) (56) – (56)Other comprehensive income net of tax from discontinued operations – 124 (10) 114 – 114

Total comprehensive income – 1,920 4,734 6,654 536 7,190

Issue of new ordinary shares 16 – – 16 – 16Issue of new preference shares 1,309 – – 1,309 – 1,309Equity settled share schemes – – 463 463 – 463Vesting of Barclays PLC shares under share-based payment schemes – – (437) (437) – (437)Capital injection from Barclays PLC – – 5,137 5,137 – 5,137Dividends paid – – (1,160) (1,160) (134) (1,294)Dividends on preference shares and other shareholders’ equity – – (502) (502) – (502)Net increase/decrease in non-controlling interest arising on acquisitions, disposals and capital issuances – – – – 4 4Other – (150) – (150) 17 (133)

Balance at 31st December 2008 14,458 4,287 22,457 41,202 2,372 43,574

Notesa Details of share capital and share premium are shown in Note 30.b Details of other reserves are shown in Note 31.c Details of retained earnings are shown in Note 31.

Consolidated accounts Barclays Bank PLCConsolidated statement of changes in equity


Consolidated accounts Barclays Bank PLCStatement of changes in equity

The Bank Otherreservesb

Share capital and otherand share shareholders’ Retained Totalpremiuma equity earningsc Total equity

£m £m £m £m £m.

Balance at 1st January 2009 14,458 2,999 16,422 33,879 33,879Net profit for the year – – 10,219 10,219 10,219Other comprehensive income:Currency translation differences – (601) – (601) (601)Available for sale financial assets – 369 – 369 369Cash flow hedges – (133) – (133) (133)Other – – – – –Tax relating to components of other comprehensive income – (65) 9 (56) (56)

Total comprehensive income – (430) 10,288 9,798 9,798

Issue of shares for cash 25 – – 25 25Equity settled share schemes – – 98 98 98Capital injection from Barclays PLC – – 4,850 4,850 4,850Vesting of Barclays PLC shares under share-based payment schemes – – (59) (59) (59)Dividends paid – – (103) (103) (103)Dividends on preference shares and other shareholders’ equity – – (599) (599) (599)Appropriations – (52) – (52) (52)Other 11 – (17) (6) (6)

Balance at 31st December 2009 14,494 2,517 30,820 47,831 47,831

Balance at 1st January 2008 13,133 2,979 6,805 22,917 22,917Net profit for the year – – 6,157 6,157 6,157Other comprehensive income:Currency translation differences – 142 – 142 142Available for sale financial assets – (517) – (517) (517)Cash flow hedges – 552 – 552 552Other – – 26 26 26Tax relating to components of other comprehensive income – 11 1 12 12

Total comprehensive income – 188 6,184 6,372 6,372

Issue of shares for cash 1,325 – – 1,325 1,325Equity settled share schemes – – 51 51 51Capital injection from Barclays PLC – – 5,137 5,137 5,137Vesting of Barclays PLC shares under share-based payment schemes – – (93) (93) (93)Dividends paid – – (1,160) (1,160) (1,160)Dividends on preference shares and other shareholders’ equity – – (502) (502) (502)Appropriations – (22) – (22) (22)Other – (146) – (146) (146)

Balance at 31st December 2008 14,458 2,999 16,422 33,879 33,879

Notesa Details of share capital and share premium are shown in Note 30b Details of other reserves are shown in Note 31c Details of retained earnings are shown in Note 31


Consolidated accounts Barclays Bank PLCCash flow statement

For the year ended 31st December The Group The Bank

2009 2008 2009 2008£m £m £m £m

Continuing operationsReconciliation of profit before tax to net cash flows from operating activities:Profit before tax 4,559 5,094 3,158 6,354Adjustment for non-cash items:Allowance for impairment 8,071 5,419 5,707 3,998Depreciation, amortisation and impairment of property, plant, equipment and intangibles 1,196 885 523 415Other provisions, including pensions 428 804 254 729Net profit from associates and joint ventures (34) (14) – –Net profit on disposal of investments and property, plant and equipment (610) (371) (314) (236)Net profit from disposal of associates and joint ventures 3 – – –Net profit from disposal of subsidiaries (191) (327) (71) ( 4,311)Net gains on acquisitions (26) (2,406) (26) (86)Other non-cash movements a 4,255 994 (1,376) (92)Changes in operating assets and liabilities:Net decrease/(increase) in loans and advances to banks and customers 25,482 (58,432) 10,574 (103,924)Net (decrease)/increase in deposits and debt securities in issue (49,014) 76,886 (20,086) 131,952Net decrease/(increase) in derivative financial instruments 3,321 (17,529) 3,047 (11,028)Net decrease in trading assets 34,292 26,945 22,757 20,423Net decrease in trading liabilities (8,222) (5,928) (5,894) (4,626)Net increase/(decrease) in financial investments 20,459 5,229 19,341 (1,032)Net increase in other assets (465) (3,013) (675) (1,088)Net (decrease)/increase in other liabilities (907) (492) (9,867) 3,832Tax paid (1,176) (1,398) (99) 156

Net cash from operating activities 41,421 32,346 26,953 41,436Purchase of available for sale investments (78,420) (57,756) (62,829) (63,608)Proceeds from sale or redemption of available for sale investments 88,931 51,429 81,518 40,770Net addition of intangible assets (226) (666) (235) (274)Purchase of property, plant and equipment (1,150) (1,643) (514) (659)Proceeds from sale of property, plant and equipment 372 799 119 347Acquisitions of subsidiaries, net of cash acquired (28) (961) (8) (779)Disposal of subsidiaries, net of cash disposed 339 238 92 4,319Disposal of discontinued operation, net of cash disposed 2,469 – 8,246 –Increase in investment in subsidiaries – (157) – (157)Decrease in investment in subsidiaries – 19 – 155Acquisition of associates and joint ventures (81) (96) (49) (4)Disposal of associates and joint ventures 69 137 – –Other cash flows associated with investing activities (15) (5) – –Investment in subsidiaries – – (2,053) (950)

Net cash from investing activities 12,260 (8,662) 24,287 (20,840)Dividends paid (590) (1,446) (103) (1,688)Proceeds of borrowings and issuance of debt securities 3,549 9,645 2,882 5,623Repayments of borrowings and redemption of debt securities (4,383) (1,207) (4,137) (1,205)Net issue of shares and other equity instruments 14 1,339 25 1,327Capital injection from Barclays PLC 800 5,137 800 5,137Net issue of shares to non-controlling interests – 11 – –

Net cash from financing activities (610) 13,479 (533) 9,194

Effect of exchange rates on cash and cash equivalents (2,864) (6,018) (2,394) (3,622)

Net cash from discontinued operations (376) 286 – –

Net increase in cash and cash equivalents 49,831 31,431 48,313 26,168

Cash and cash equivalents at beginning of year 64,509 33,078 48,044 21,876

Cash and cash equivalents at end of year 114,340 64,509 96,357 48,044

Cash and cash equivalents comprise:Cash and balances at central banks 81,483 30,019 78,447 24,867Loans and advances to banks 41,135 47,707 42,963 37,824Less: non-cash amounts and amounts with original maturity greater than three months (10,674) (15,428) (25,273) (14,896)

30,461 32,279 17,690 22,928Available for sale treasury and other eligible bills 56,483 64,976 36,574 57,902Less: non-cash and amounts with original maturity greater than three months (54,239) (62,876) (36,506) (57,764)

2,244 2,100 68 138Trading portfolio assets 151,344 185,637 93,806 116,522Less: non-cash and amounts with original maturity greater than three months (151,192) (185,526) (93,654) (116,411)

152 111 152 111

114,340 64,509 96,357 48,044

Interest received in 2009 was £32,437m (2008: £41,017m) and interest paid in 2009 was £20,889m (2008: £38,975m).

The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £2,470m at 31st December 2009(2008: £1,050m).Notea Other non-cash movements principally comprise movements in exchange rates and the fair value of available for sale investments less subordinated debt hedging.


Notes to the accountsFor the year ended 31st December 2009

1 DividendsDividends paid in the year were:

2009 2008£m £m

On ordinary sharesFinal dividend – 1,030Interim dividends 103 130

Dividends 103 1,160

These dividends are paid to enable Barclays PLC to fund its dividends to its shareholders and in 2009, to fund the repurchase by Barclays PLC of ordinaryshare capital.

Dividends per ordinary share for 2009 were 4p (2008: 49.6p). Dividends paid on the 4.75% ¤100 preference shares amounted to £441.42 per share (2008:£364.42). Dividends paid on the 4.875% ¤100 preference shares amounted to £439.34 per share (2008: £426.88). Dividends paid on the 6.0% £100preference shares amounted to £600.00 per share (2008: £600.00). Dividends paid on the 6.278% US$100 preference shares amounted to £385.59 pershare (2008: £372.78). Dividends paid on the 6.625% US$0.25 preference shares amounted to £1.06 per share (2008: 93.0p). Dividends paid on the 7.1%US$0.25 preference shares amounted to £1.13 per share (2008: £1.00). Dividends paid on the 7.75% US$0.25 preference shares amounted to £1.24 pershare (2008: £1.11). Dividends paid on the 8.125% US$0.25 preference shares amounted to £1.30 per share (2008: 82.0p).

Dividends paid on preference shares amounted to £477m (2008: £390m). Dividends paid on other equity instruments as detailed in Note 32 amounted to£122m (2008: £112m).

2 Net interest income

The Group 2009 2008£m £m

Cash and balances with central banks 131 174Available for sale investments 1,937 2,355Loans and advances to banks 513 1,267Loans and advances to customers 18,456 23,754Other 199 460

Interest income 21,236 28,010

Deposits from banks (634) (2,189)Customer accounts (2,720) (6,714)Debt securities in issue (4,134) (5,947)Subordinated liabilities (1,718) (1,349)Other (361) (396)

Interest expense (9,567) (16,595)

Net interest income 11,669 11,415

Interest income includes £185m (2008: £135m) arising from impaired loans.

Other interest income principally includes interest income relating to reverse repurchase agreements. Similarly, other interest expense principally includesinterest expense relating to repurchase agreements and hedging activity.

Included in net interest income is hedge ineffectiveness as detailed in Note 13.


3 Net fee and commission income


Fee and commission incomeBrokerage fees 88 56Investment management fees 133 120Banking and credit related fees and commissions 9,578 7,208Foreign exchange commissions 147 189

Fee and commission income 9,946 7,573

Fee and commission expense (1,528) (1,082)

Net fee and commission income 8,418 6,491

4 Principal transactions


Net trading income 6,994 1,270

Net gain from disposal of available for sale assets 576 212Dividend income 6 196Net (loss)/gain from financial instruments designated at fair value (208) 33Other investment (losses)/income (91) 239

Net investment income 283 680

Principal transactions 7,277 1,950

Net trading income includes the profits and losses arising both on the purchase and sale of trading instruments and from the revaluation to fair value,together with the interest income earned from these instruments and the related funding cost.

Net trading income included a £682m gain (2008: £1,272m) related to foreign exchange dealings.

The net loss on financial assets designated at fair value included within principal transactions was £2,557m (2008: £6,602m loss) of which losses of£2,349m (2008: £6,635m loss) were included in net trading income and losses of £208m (2008: £33m gain) were included in net investment income.

The net loss on financial liabilities designated at fair value included within principal transactions was £3,158m (2008: £3,328m gain), all of which wasincluded within net trading income.

Net trading income includes the net loss from tightening credit spreads relating to Barclays Capital issued structured notes held at fair value was £1,820m(2008: £1,663m gain).

5 Insurance premiums and insurance claims and benefits


Gross premiums from insurance contracts 1,224 1,138Premiums ceded to reinsurers (52) (48)

Net premiums from insurance contracts 1,172 1,090

2009 2008£m £m

Gross claims and benefits incurred on insurance contracts 858 263Reinsurers’ share of claims incurred (27) (26)

Net claims and benefits incurred on insurance contracts 831 237



6 Other income


Increase/(decrease) in fair value of assets held in respect of linked liabilities to customers under investment contracts 102 (1,219)(Increase)/decrease in liabilities to customers under investment contracts (102) 1,219Property rentals 64 73Gain on debt buy backs and extinguishments 1,255 24Other income 70 347

Other income 1,389 444

7 Impairment charges and other credit provisions


Impairment charges on loans and advancesNew and increased impairment allowances 8,111 5,116Releases (631) (358)Recoveries (150) (174)

Impairment charges on loans and advances 7,330 4,584Charge/(release) in respect of provision for undrawn contractually committed facilities and guarantees provided 28 329

Impairment charges on loans and advances and other credit provisions 7,358 4,913Impairment charges on reverse repurchase agreements 43 124Impairment on available for sale assets 670 382

Impairment charges and other credit provisions 8,071 5,419

An analysis of the impairment charges by class of financial instrument is included in Note 47.

8 Staff costs


Salaries and accrued incentive payments 8,081 5,787Social security costs 606 444Pension costs – defined contribution plans 224 221Pension costs – defined benefit plans (Note 30) (33) 89Other post-retirement benefits (Note 30) 16 1Other 1,054 662

Staff costs 9,948 7,204

Included in salaries and incentive payments is £290m (2008: £257m) arising from equity settled share-based payments, of which £56m (2008: £23m) is acharge related to option-based schemes and of which £12m (2008: £35m) relates to discontinued operations. Also included is £8m (2008: £3m) arisingfrom cash settled share-based payments.

In December 2009, the UK government announced that the Finance Bill 2010 will introduce a bank payroll tax of 50% applicable to discretionary bonusesover £25,000 awarded to UK bank employees between 9th December 2009 and 5th April 2010. Draft legislation and further guidance on its application hasbeen published. Based on this, and in accordance with IAS 19 – Employee benefits, the Group has accrued for the estimated tax payable in respect ofemployee services provided during the period. For 2009, £190m has been included within Other Staff Costs in respect of 2009 cash awards. A furtherprovision of £35m has also been included in Other Staff Costs in respect of certain prior year awards being distributed during the tax window, which may fallwithin the proposed legislation.

Staff costs above relate to continuing operations only. Total staff costs for the Group (including continuing and discontinuing operations) was £10,683m(2008: £7,779m) comprising salaries and accrued incentive payments of £8,595m (2008: £6,273m), social security costs of £621m (2008: £464m),pension costs of £217m (2008: £326m), other post-retirement benefits of £19m (2008: £1m) and other staff costs of £1,231m (2008: £715m).

The total average number of persons employed by the Group (including both continuing and discontinued operations) during the year was 153,800(2008: 151,500).


9 Administration and general expenses


Administrative expenses 4,886 4,787Impairment charges– property and equipment (Note 22) 34 33– intangible assets (Note 21) 27 (3)– goodwill (Note 20) 1 112Operating lease rentals 639 520Gain on property disposals (29) (148)

Administration and general expenses 5,558 5,301

Auditors’ remuneration

Audit Taxation OtherAudit related services services Total

Notes £m £m £m £m £m

2009Audit of the Group’s annual accounts 12 – – – 12Other services:Fees payable for the audit of the Company’s associates pursuant to legislation (a) 23 – – – 23Other services supplied pursuant to such legislation (b) – 2 – – 2Other services relating to taxation (c) – – 7 – 7Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company or any of its associates (d) – – – 3 3Other – 4 – 1 5

Total auditors’ remuneration 35 6 7 4 52

2008Audit of the Group’s annual accounts 12 – – – 12Other services:Fees payable for the audit of the Company’s associates pursuant to legislation (a) 19 – – – 19Other services supplied pursuant to such legislation (b) – 2 – – 2Other services relating to taxation (c) – – 9 – 9Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company or any of its associates (d) – – – 2 2Other – 4 – 1 5

Total auditors’ remuneration 31 6 9 3 49

The figures shown in the above tables relate to fees paid to PricewaterhouseCoopers LLP and its associates for continuing operations of business. Fees paidto other auditors not associated with PricewaterhouseCoopers LLP in respect of the audit of the Company’s subsidiaries were £3m (2008: £3m).

a) Fees payable for the audit of the Company’s associates pursuant to legislation comprise the fees for the statutory audit of the subsidiaries and associatedpension schemes both inside and outside Great Britain and fees for the work performed by the associates of PricewaterhouseCoopers LLP in respect ofthe consolidated financial statements of the Company. The fees relating to the audit of the associated pension schemes were £0.5m (2008: £0.2m).

b) Other services supplied pursuant to such legislation comprise services in relation to statutory and regulatory filings. These include audit services for thereview of the interim financial information under the Listing Rules of the UK listing authority and fees paid for reporting under Section 404 of the USSarbanes-Oxley Act (Section 404). In 2009 and 2008, fees paid for reporting under Section 404 are separately identifiable from the audit of the Group.

c) Other services related to taxation include compliance services such as tax return preparation and advisory services such as consultation on tax matters, tax advice relating to transactions and other tax planning and advice.

d) Services relating to corporate finance transactions comprise due diligence related to transactions and other work in connection with such transactions.

Excluded from the total auditors’ remuneration above are fees paid to PricewaterhouseCoopers LLP and associates relating to BGI (discontinuedoperations) of £4m (2008: £3m).



10 TaxThe charge for tax is based upon the UK corporation tax rate of 28% (2008: 28.5%) and comprises:


Current tax charge/(credit)Current year 1,235 1,197Adjustment for prior years (131) 98

1,104 1,295

Deferred tax (credit)/chargeCurrent year 45 (577)Adjustment for prior years (102) (269)

(57) (846)

Total charge/(credit) 1,047 449

The effective tax rate for the years 2009 and 2008 is lower than the standard rate of corporation tax in the UK of 28% (2008: 28.5%). The differences are setout below:


Profit before tax 4,560 5,094

Tax charge at standard UK corporation tax rate of 28% (2008: 28.5%) 1,277 1,452Adjustment for prior years (233) (171)Effect of overseas tax rates different from UK standard tax rate (27) 175Non-taxable gains and income (including amounts offset by unrecognised tax losses) (119) (851)Share-based payments (38) 201Deferred tax assets not recognised/(previously not recognised) 27 (504)Change in tax rates (12) (1)Other non-allowable expenses 172 148

Overall tax charge 1,047 449

Effective tax rate 23% 9%

The effective tax rate for 2009, based on profit before tax on continuing operations was 23.0% (2008: 8.8%). The effective tax rate differs from the UK tax rate of 28% (2008: 28.5%) because of non-taxable gains and income, different tax rates applied to taxable profits and losses outside the UK, disallowedexpenditure and adjustments in respect of prior years. The low effective tax rate of 8.8% on continuing operations in 2008 mainly resulted from the Lehman Brothers North American businesses acquisition.

Tax effects relating to each component of other comprehensive income

For the year ended 31st December 2009 2008

Tax TaxBefore tax (expense)/ Net of tax Before tax (expense)/ Net of tax

amount benefit amount amount benefit amount£m £m £m £m £m £m

Continuing operationsCurrency translation differences (853) (2) (855) 2,233 840 3,073Available for sale 1,320 (177) 1,143 (1,577) 207 (1,370)Cash flow hedge 165 (65) 100 376 (194) 182Other (1) 218 217 (56) (2) (58)

Other comprehensive income 631 (26) 605 976 851 1,827


11 Trading portfolio

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Trading portfolio assetsTreasury and other eligible bills 9,926 4,544 8,969 425Debt securities 116,594 148,686 74,711 102,923Equity securities 19,653 30,544 5,552 11,704Traded loans 2,962 1,070 2,945 1,047Commodities 2,260 802 1,629 423

Trading portfolio assets 151,395 185,646 93,806 116,522

Trading portfolio liabilitiesTreasury and other eligible bills (381) (79) (73) (39)Debt securities (44,327) (44,309) (30,920) (35,954)Equity securities (6,468) (14,919) (2,465) (3,268)Commodities (76) (167) (76) (167)

Trading portfolio liabilities (51,252) (59,474) (33,534) (39,428)

As disclosed in Note 51, £8,027m of collateralised loan obligations were reclassified from trading portfolio assets to loans and receivables during the year.

12 Financial assets designated at fair value Held on own account

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Loans and advances 22,390 30,187 21,636 24,596Debt securities 4,007 8,628 3,338 7,801Equity securities 6,256 6,496 66 12Other financial assets 8,658 9,231 2,605 1,689

Financial assets designated at fair value – held on own account 41,311 54,542 27,645 34,098

The maximum exposure to credit risk on loans and advances designated at fair value at 31st December 2009 was £22,390m (2008: £30,187m). The amount by which related credit derivatives and similar instruments mitigate the exposure to credit risk at 31st December was £1,416m (2008: £2,084m).

The net loss attributable to changes in credit risk for loans and advances designated at fair value was £2,370m in 2009 (2008: £2,550m). The gains on related credit derivatives was £229m for the year (2008: £519m).

The cumulative net loss attributable to changes in credit risk for loans and advances designated at fair value since initial recognition is £5,321m at 31st December 2009 (2008: £2,951m). The cumulative change in fair value of related credit derivatives at 31st December 2009 is £744m (2008: £515m).

The maximum exposure to credit risk on loans and advances designated at fair value at 31st December 2009 by the Bank was £18,797m (2008: £22,888m). The amount by which related credit derivatives and similar instruments mitigate the Bank’s exposure to credit risk at 31st December2009 was £1,224m (2008: £1,870m).

Held in respect of linked liabilities to customers under investment contracts/liabilities arising from investment contracts

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts 1,257 66,657 – –Cash and bank balances within the portfolio 422 2,526 – –

Assets held in respect of linked liabilities to customers under investment contracts 1,679 69,183 – –

Liabilities to customers under investment contracts (1,679) (69,183) – –

A portion of the Group’s fund management business in 2008 mostly relating to BGI, takes the legal form of investment contracts, under which legal title tothe underlying investment is held by the Group, but the inherent risks and rewards in the investments are borne by the investors. In the normal course ofbusiness, the Group’s financial interest in such investments is restricted to fees for investment management services.



12 Financial assets designated at fair value continuedDue to the nature of these contracts, the carrying value of the assets is always the same as the value of the liabilities and any change in the value of theassets results in an equal but opposite change in the value of the amounts due to the policyholders.

The Group is therefore not exposed to the financial risks – market risk, credit risk and liquidity risk – inherent in the investments and they are omitted fromthe disclosures on financial risks in Notes 46 to 48.

On the balance sheet, the assets are included as ‘Financial assets designated at fair value – held in respect of linked liabilities to customers under investmentcontracts’. Cash balances within the portfolio have been included in the Group’s cash balances. The associated obligation to deliver the value of the investments to customers at their fair value on balance sheet date is included as ‘Liabilities to customers under investment contracts’.

The increase/decrease in the fair value arising from the return on the investments and the corresponding increase/decrease in linked liabilities to customers is disclosed in Note 6.

13 Derivative financial instruments Financial instrumentsThe Group’s objectives and policies on managing the risks that arise in connection with derivatives, including the policies for hedging, are included in Note 46 to Note 49.

The fair values and notional amounts of derivative instruments held for trading are set out in the following table:

Year ended 31st December 2009 The Group The BankDerivatives held for trading 2009 2009

Notional Notionalcontract Fair value contract Fair value

amount Assets Liabilities amount Assets Liabilities£m £m £m £m £m £m

Foreign exchange derivativesForward foreign exchange 1,457,271 18,148 (18,019) 1,435,729 17,581 (17,407)Currency swaps 810,666 26,008 (32,357) 805,118 25,372 (31,648)OTC options bought and sold 539,976 7,332 (7,321) 537,623 7,292 (7,321)

OTC derivatives 2,807,913 51,488 (57,697) 2,778,470 50,245 (56,376)Exchange traded futures – bought and sold 2,035 – – 2,035 – –Exchange traded options – bought and sold 28,220 – – 28,220 – –

Foreign exchange derivatives 2,838,168 51,488 (57,697) 2,808,725 50,245 (56,376)

Interest rate derivativesInterest rate swaps 9,408,811 193,133 (179,744) 9,276,271 191,651 (178,300)Forward rate agreements 4,436,628 3,595 (3,289) 4,270,839 2,266 (2,105)OTC options bought and sold 5,113,613 63,647 (61,304) 5,090,650 63,608 (61,272)

OTC derivatives 18,959,052 260,375 (244,337) 18,637,760 257,525 (241,677)Exchange traded futures – bought and sold 547,685 – – 543,428 – –Exchange traded options – bought and sold 272,960 – – 272,953 – –Exchange traded swaps 13,424,261 – – 13,424,261 – –

Interest rate derivatives 33,203,958 260,375 (244,337) 32,878,402 257,525 (241,677)

Credit derivativesSwaps 2,016,796 56,295 (51,780) 2,016,080 56,240 (51,671)

Equity and stock index derivativesOTC options bought and sold 124,944 13,042 (15,681) 117,431 12,500 (14,797)Equity swaps and forwards 45,922 2,057 (1,718) 40,977 1,372 (1,059)

OTC derivatives 170,866 15,099 (17,399) 158,408 13,872 (15,856)Exchange traded futures – bought and sold 57,565 – – 44,787 – –Exchange traded options – bought and sold 130,885 2,631 (2,371) 32,593 – –

Equity and stock index derivatives 359,316 17,730 (19,770) 235,788 13,872 (15,856)

Commodity derivativesOTC options bought and sold 92,508 4,262 (4,215) 91,987 4,068 (4,162)Commodity swaps and forwards 252,621 22,872 (22,012) 251,803 22,832 (21,925)

OTC derivatives 345,129 27,134 (26,227) 343,790 26,900 (26,087)Exchange traded futures – bought and sold 312,883 2,436 (2,008) 311,459 2,436 (2,007)Exchange traded options – bought and sold 55,729 180 (200) 54,876 179 (200)

Commodity derivatives 713,741 29,750 (28,435) 710,125 29,515 (28,294)

Derivative with subsidiaries 21,579 (23,181)

Derivative assets/(liabilities) held for trading 39,131,979 415,638 (402,019) 38,649,120 428,976 (417,055)


13 Derivative financial instruments continuedThe fair values and notional amounts of derivative instruments held for risk management are set out in the following table:

Year ended 31st December 2008 The Group The BankDerivatives held for trading 2008 2008

Notional Notionalcontract

Fair valuecontract

Fair value


Foreign exchange derivativesForward foreign exchange 1,374,108 44,631 (46,371) 1,346,142 43,242 (44,884)Currency swaps 828,983 47,077 (53,116) 820,466 46,284 (51,942)OTC options bought and sold 426,739 15,405 (14,331) 422,091 15,293 (14,226)

OTC derivatives 2,629,830 107,113 (113,818) 2,588,699 104,819 (111,052)Exchange traded futures – bought and sold 8,008 – – 9,194 – –Exchange traded options – bought and sold 1,295 – – 245 – –

Foreign exchange derivatives 2,639,133 107,113 (113,818) 2,598,138 104,819 (111,052)

Interest rate derivativesInterest rate swaps 17,624,591 498,661 (496,292) 17,536,458 496,864 (494,254)Forward rate agreements 4,377,619 8,853 (8,224) 4,008,200 8,628 (8,008)OTC options bought and sold 5,598,960 105,743 (101,005) 5,583,942 105,609 (100,918)

OTC derivatives 27,601,170 613,257 (605,521) 27,128,600 611,101 (603,180)Exchange traded futures – bought and sold 586,312 – – 581,688 – –Exchange traded options – bought and sold 276,752 – – 270,380 – –Exchange traded swaps 9,411,001 – – 9,411,001 – –

Interest rate derivatives 37,875,235 613,257 (605,521) 37,391,669 611,101 (603,180)

Credit derivativesSwaps 4,129,244 184,072 (170,011) 4,027,790 181,743 (166,758)

Equity and stock index derivativesOTC options bought and sold 180,157 19,576 (19,998) 154,971 18,736 (18,963)Equity swaps and forwards 51,267 3,432 (2,819) 46,871 2,697 (2,101)

OTC derivatives 231,424 23,008 (22,817) 201,842 21,433 (21,064)Exchange traded futures – bought and sold 38,340 – – 33,132 – –Exchange traded options – bought and sold 121,712 5,551 (3,109) 38,213 5,548 (3,500)

Equity and stock index derivatives 391,476 28,559 (25,926) 273,187 26,981 (24,564)

Commodity derivativesOTC options bought and sold 78,680 6,565 (10,261) 78,243 6,389 (10,095)Commodity swaps and forwards 407,015 38,316 (35,556) 404,744 38,176 (35,579)

OTC derivatives 485,695 44,881 (45,817) 482,987 44,565 (45,674)Exchange traded futures – bought and sold 165,564 3,953 (2,745) 163,454 3,953 (2,745)Exchange traded options – bought and sold 54,435 161 (233) 54,406 161 (233)

Commodity derivatives 705,694 48,995 (48,795) 700,847 48,679 (48,652)

Derivatives with subsidiaries 27,927 (31,099)

Derivative assets/(liabilities) held for trading 45,740,782 981,996 (964,071) 44,991,631 1,001,250 (985,305)



13 Derivative financial instruments continuedThe fair values and notional amounts of derivative instruments held for risk management are set out in the following table:

Derivatives held for risk management The Group The Bank



Year ended 31st December 2009Derivatives designated as cash flow hedgesInterest rate swaps 79,241 478 (494) 56,675 324 (483)OTC options bought and sold 673 2 – 673 2 –Forward foreign exchange 2,224 237 (51) 2,215 236 (55)Exchange traded interest rate swaps 33,534 – – 33,534 – –

Derivatives designated as cash flow hedges 115,672 717 (545) 93,097 562 (538)

Derivatives designated as fair value hedgesCurrency swaps 502 10 – – – –Interest rate swaps 12,199 357 (459) 11,948 317 (423)Equity options 7,710 53 (56) 134 – (1)Forward foreign exchange 5,386 18 (103) 5,386 18 (103)Exchange traded interest rate swaps 32,257 – – 32,257 – –

Derivatives designated as fair value hedges 58,054 438 (618) 49,725 335 (527)

Derivatives designated as hedges of net investmentsForward foreign exchange 5,321 22 (97) 5,321 22 (97)Currency swaps 971 – (137) 971 – (137)

Derivatives designated as hedges of net investment 6,292 22 (234) 6,292 22 (234)

Derivative assets/(liabilities) held for risk management 180,018 1,177 (1,397) 149,114 919 (1,299)

Year ended 31st December 2008Derivatives designated as cash flow hedgesCurrency swaps 586 – (271) 586 – (271)Interest rate swaps 60,669 1,013 (1,011) 47,687 831 (970)Equity options 400 – (154) 400 – (154)Forward foreign exchange 1,871 309 (354) 1,844 309 (351)Exchange traded interest rate swaps 20,028 – – 20,028 – –

Derivatives designated as cash flow hedges 83,554 1,322 (1,790) 70,545 1,140 (1,746)

Derivatives designated as fair value hedgesCurrency swaps 2,666 283 (105) 2,486 274 (105)Interest rate swaps 14,010 1,052 (357) 12,578 1,017 (302)Equity options 259 124 (110) – – –Exchange traded interest rate swaps 18,767 – – 18,767 – –

Derivatives designated as fair value hedges 35,702 1,459 (572) 33,831 1,291 (407)

Derivatives designated as hedges of net investmentsForward foreign exchange 2,019 4 (76) 2,019 4 (76)Currency swaps 3,675 21 (1,563) 3,675 – (1,563)

Derivatives designated as hedges of net investment 5,694 25 (1,639) 5,694 4 (1,639)

Derivative assets/(liabilities) held for risk management 124,950 2,806 (4,001) 110,070 2,435 (3,792)

Interest rate derivatives, designated as cash flow hedges, primarily hedge the exposure to cash flow variability from interest rates of variable rate loans tobanks and customers, variable rate debt securities held and highly probable forecast financing transactions and reinvestments.

Interest rate derivatives designated as fair value hedges primarily hedge the interest rate risk of fixed rate borrowings in issue, fixed rate loans to banks andcustomers and investments in fixed rate debt securities held.

Currency derivatives are primarily designated as hedges of the foreign currency risk of net investments in foreign operations.


13 Derivative financial instruments continuedThe Group’s total derivative asset and liability position as reported on the balance sheet is as follows:

The Group The Bank



Year ended 31st December 2009Total derivative assets/(liabilities) held for trading 39,131,979 415,638 (402,019) 38,649,120 428,976 (417,055)Total derivative assets/(liabilities) held for risk management 180,018 1,177 (1,397) 149,114 919 (1,299)

Derivative assets/(liabilities) 39,311,997 416,815 (403,416) 38,798,234 429,895 (418,354)

Year ended 31st December 2008Total derivative assets/(liabilities) held for trading 45,740,782 981,996 (964,071) 44,991,631 1,001,250 (985,305)Total derivative assets/(liabilities) held for risk management 124,950 2,806 (4,001) 110,070 2,435 (3,792)

Derivative assets/(liabilities) 45,865,732 984,802 (968,072) 45,101,701 1,003,685 (989,097)

Derivative assets and liabilities subject to counterparty netting agreements amounted to £343bn (2008: £862bn). Additionally, the Group held £31bn(2008: £55bn) of collateral against the net derivative assets exposure.

The Group has hedged the following forecast cash flows, which primarily vary with interest rates. These cash flows are expected to impact the incomestatement in the following periods, excluding any hedge adjustments that may be applied:

Between Between Between BetweenUp to one to two to three to four to More than

Total one year two years three years four years five years five years£m £m £m £m £m £m £m

2009The GroupForecast receivable cash flows 3,304 467 838 837 700 370 92Forecast payable cash flows 558 51 96 122 145 116 28

The BankForecast receivable cash flows 3,147 393 792 811 691 368 92Forecast payable cash flows 547 49 95 121 144 115 23

2008The GroupForecast receivable cash flows 2,569 875 586 596 347 127 38Forecast payable cash flows 974 275 166 175 145 123 90

The BankForecast receivable cash flows 2,368 790 535 563 324 119 37Forecast payable cash flows 960 268 163 175 145 123 86

The maximum length of time over which the Group and the Bank hedge exposure to the variability in future cash flows for forecast transactions, excludingthose forecast transactions related to the payment of variable interest on existing financial instruments, is nine years (2008: seven years).

All gains or losses on hedging derivatives relating to forecast transactions, which are no longer expected to occur, have been recycled to the incomestatement.

A loss of £1,478m on hedging instruments was recognised in relation to fair value hedges in net interest income for the Group (2008: £2,439m gain). A gain of £1,604m on the hedged items was recognised in relation to fair value hedges in net interest income for the Group (2008: £2,423m loss).

Ineffectiveness recognised in relation to cash flow hedges in net interest income for the Group was a gain of £21m (2008: £14m gain). Ineffectivenessrecognised in relation to hedges of net investment for the Group was a loss of £5m (2008: £2m gain).

A loss of £1,513m on hedging instruments was recognised in relation to fair value hedges in net interest income for the Bank (2008: £2,438m gain). A gain of £1,624m on the hedged items was recognised in relation to fair value hedges in net interest income for the Bank (2008: £2,448m loss).

Ineffectiveness recognised in relation to cash flow hedges in net interest income for the Bank was a gain of £22m (2008: £21m gain). Ineffectivenessrecognised in relation to hedges of net investment for the Bank was a loss of £5m (2008: £1m loss).



14 Loans and advances to banks and customers

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Gross loans and advances to banks 41,196 47,758 43,024 37,875Less: Allowance for impairment (61) (51) (61) (51)

Loans and advances to banks 41,135 47,707 42,963 37,824

Gross loans and advances to customers 430,959 468,338 519,469 559,112Less: Allowance for impairment (10,735) (6,523) (7,341) (5,223)

Loans and advances to customers 420,224 461,815 512,128 553,889

15 Available for sale financial investments

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Debt securities 43,888 58,831 34,891 57,061Treasury bills and other eligible bills 5,919 4,003 1,093 380Equity securities 6,844 2,182 590 461

Available for sale financial investments 56,651 65,016 36,574 57,902

Movement in available for sale financial investmentsAt beginning of year 65,016 43,256 57,902 25,582Exchange and other adjustments (4,439) 14,275 (3,148) 9,919Acquisitions and transfers 83,915 59,703 62,829 63,608Disposals (through sale and redemption) (88,999) (50,629) (81,276) (40,591)Gains/(losses) from changes in fair value recognised in equity 1,889 (1,190) 617 (383)Impairment charge (670) (382) (351) (219)Amortisation charge (6) (17) 1 (14)Business disposals/discontinued operations (55) – – –

At end of year 56,651 65,016 36,574 57,902


16 Securities borrowing, securities lending, repurchase and reverse repurchase agreementsAmounts included in the balance sheet and reported on a net basis where the Group has the intention and the legal ability to settle net or realisesimultaneously were as follows:

(a) Reverse repurchase agreements and cash collateral held on securities borrowedAmounts advanced to counterparties under reverse repurchase agreements and cash collateral provided under stock borrowing agreements are treated ascollateralised loans receivable. The related securities purchased or borrowed subject to an agreement with the counterparty to repurchase them are notrecognised on balance sheet where the risks and rewards of ownership remain with the counterparty.

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Banks 67,872 55,471 47,108 37,055Customers 75,559 74,883 98,325 91,760

Reverse repurchase agreements and cash collateral on securities borrowed 143,431 130,354 145,433 128,815

(b) Repurchase agreements and cash collateral on securities lentSecurities that are not recorded on the balance sheet (for example, securities that have been obtained as a result of reverse repurchase and stock borrowingtransactions) may also be lent or sold subject to a commitment to repurchase – such securities remain off-balance sheet. In both instances, amountsreceived from counterparty are treated as liabilities, which at 31st December were as follows:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Banks 93,692 87,403 53,791 61,683Customers 105,089 94,882 111,404 87,267

Repurchase agreements and cash collateral on securities lent 198,781 182,285 165,195 148,950

17 Other assets

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Sundry debtors 4,909 4,814 4,183 3,662Prepayments 1,010 882 566 478Accrued income 347 483 448 289Reinsurance assets 92 123 – –

Other assets 6,358 6,302 5,197 4,429

Included in the above Group balances are £4,978m (2008: £4,704m) expected to be recovered within no more than 12 months after the balance sheetdate; and balances of £1,380m (2008: £1,598m) expected to be recovered more than 12 months after the balance sheet date.

Included in the above Bank balances are £4,599m (2008: £3,685m) expected to be recovered within no more than 12 months after the balance sheet date,and balances of £598m (2008: £744m) expected to be recovered more than 12 months after the balance sheet date.

Other assets for the Group include £3,476m (2008: £3,096m) of receivables which meet the definition of financial assets.

Other assets for the Bank include £1,198m (2008: £2,268m) of receivables which meet the definition of financial assets.



18 Deferred taxThe components of taxes disclosed on the balance sheet are as follows:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Deferred tax liability (470) (304) (38) (20)Deferred tax asset 2,303 2,668 773 867

Net deferred tax 1,833 2,364 735 847

Deferred taxes are calculated on all temporary differences under the liability method. Movements on deferred tax assets and liabilities were as follows:

Pensions AllowanceFixed Available and other for Tax losses

asset timing for sale Cash flow retirement impairment Other carried Share baseddifferences investments hedges benefits on loans provisions forward payments Other Total

£m £m £m £m £m £m £m £m £m £m

The GroupLiabilities (945) (46) (368) – – – – – (1,075) (2,434)Assets 87 57 246 403 356 532 1,659 342 1,116 4,798

At 1st January 2009 (858) 11 (122) 403 356 532 1,659 342 41 2,364Income statement 340 (8) 44 (189) 39 15 (785) 50 293 (201)Equity – (21) (59) – – – – 156 24 100Acquisitions and disposals 1 – – (5) (1) (8) 4 (41) (98) (148)Exchange andother adjustments (26) (8) (2) 10 (15) (245) 160 (171) 15 (282)

(543) (26) (139) 219 379 294 1,038 336 275 1,833

Liabilities (660) (54) (278) – – – – – (197) (1,189)Assets 117 28 139 219 379 294 1,038 336 472 3,022

At 31st December 2009 (543) (26) (139) 219 379 294 1,038 336 275 1,833

Liabilities (803) (101) (51) – – – – – (771) (1,726)Assets – – 44 491 108 377 215 428 671 2,334

At 1st January 2008 (803) (101) (7) 491 108 377 215 428 (100) 608Income statement 124 8 5 (90) 223 (10) 598 (215) 227 870Equity – 103 (161) – – – 750 (33) (13) 646Acquisitions and disposals (195) – – – – 56 – 75 (211) (275)Exchange andother adjustments 16 1 41 2 25 109 96 87 138 515

(858) 11 (122) 403 356 532 1,659 342 41 2,364

Liabilities (945) (46) (368) – – – – – (1,075) (2,434)Assets 87 57 246 403 356 532 1,659 342 1,116 4,798

At 31st December 2008 (858) 11 (122) 403 356 532 1,659 342 41 2,364


18 Deferred tax continued

Pensions AllowanceFixed Available and other for Tax losses

asset timing for sale Cash flow retirement impairment Other carried Share baseddifferences investments hedges benefits on loans provisions forward payments Other Total

£m £m £m £m £m £m £m £m £m £m

The BankLiabilities (10) (2) (213) – – – – – – (225)Assets – – – 335 85 12 410 23 207 1,072

At 1st January 2009 (10) (2) (213) 335 85 12 410 23 207 847Income statement 46 (12) 36 (193) 86 12 (257) 14 (111) (379)Equity – (4) 36 – – – – 7 (4) 35Acquisitions and disposals – – – – – – – – (20) (20)Exchange and other adjustments – (1) 1 – (1) 27 215 – 11 252

36 (19) (140) 142 170 51 368 44 83 735

Liabilities – (19) (140) – – – – – (38) (197)Assets 36 – – 142 170 51 368 44 121 932

At 31st December 2009 36 (19) (140) 142 170 51 368 44 83 735

Liabilities (24) (56) – – – – – – – (80)Assets – – 2 432 30 57 4 32 308 865

At 1st January 2008 (24) (56) 2 432 30 57 4 32 308 785Income statement 16 2 4 (79) 45 (27) 354 (10) (128) 177Equity – 54 (218) – – – – – (15) (179)Acquisitions and disposals – – – – – – – – (9) (9)Exchange and other adjustments (2) (2) (1) (18) 10 (18) 52 1 51 73

(10) (2) (213) 335 85 12 410 23 207 847

Liabilities (10) (2) (213) – – – – – – (225)Assets – – – 335 85 12 410 23 207 1,072

At 31st December 2008 (10) (2) (213) 335 85 12 410 23 207 847

The amount of deferred tax liability expected to be settled after more than 12 months for the Group is £955m (2008: £1,949m) and for the Bank is £167m (2008: £434m).

The amount of deferred tax asset expected to be recovered after more than 12 months for the Group is £2,446m (2008: £4,593m) and for the Bank is £749m (2008: £1,137m).

The deferred tax assets balance for the Group includes £197m (2008: £2,139m) which is the excess deferred tax assets over deferred tax liabilities inentities which have suffered a loss in either the current or prior year. This is based on management assessment that it is probable that the relevant entitieswill have taxable profits against which the temporary differences can be utilised.

Deferred tax assets have not been recognised for the Group in respect of deductible temporary differences (gross) of £4m (2008: £9m), unused tax losses(gross) of £8,542m (2008: £4,083m) and unused tax credits of £nil (2008: £46m). Deferred tax assets have not been recognised for the Bank in respect ofdeductible temporary differences (gross) of £4m (2008: £nil), unused tax losses (gross) of £8,505m (2008: £3,906m) and unused tax credits £nil (2008: £nil). Tax losses of the Group expire: £8,516m in 2029. The other tax losses, tax credits and temporary differences do not expire under current taxlegislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be availableagainst which the Group can utilise benefits. The unused tax losses include amounts relating to non-UK branches of Barclays Bank PLC where the future taxbenefit might be restricted to the amount in excess of the UK rate.

The amount of temporary differences associated with investments in subsidiaries, branches, associates and joint ventures for which deferred tax liabilitieshave not been recognised in the Group is £738m (2008: £8,429m).



19 Investment in associates and joint venturesShare of net assets

Associates Joint ventures Total

2009 2008 2009 2008 2009 2008£m £m £m £m £m £m

The GroupAt beginning of year 175 90 166 287 341 377Share of results before tax 21 25 21 (6) 42 19Share of tax (2) (3) (6) (2) (8) (5)

Share of post-tax results 19 22 15 (8) 34 14

Dividends paid – – (1) – (1) –New investments 198 6 1 27 199 33Acquisitions 38 62 3 1 41 63Disposals (58) (20) (14) (117) (72) (137)Exchange and other adjustments (122) 15 2 (24) (120) (9)

At end of year 250 175 172 166 422 341

The BankAt beginning of year 9 7 103 105 112 112New investments 49 2 – 8 49 10Disposals – – – (10) – (10)Exchange and other adjustments 4 – (1) – 3 –

At end of year 62 9 102 103 164 112

Goodwill included above:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

CostAt beginning of year 31 27 31 27Acquisitions 19 – 19 –Exchange and other adjustments (2) 4 (2) 4

At end of year 48 31 48 31

The Group holds investments in associates listed on the Johannesburg Stock Exchange: Pinnacle Point Group Limited, Blue Financial Services Limited(acquired during 2009) and Sekunjalo Investments Limited (acquired during 2009). The fair value of these investments at 31st December 2009 was £15m(2008: £60m). Ambit Properties Limited was disposed during 2009 (2008: fair value of £51m).

Aggregate cash consideration paid for additional investments in associates and joint ventures was £82m (2008: £96m), which also included New ChinaTrust. Additional investments for non-cash consideration, include Barclays Vida y Pensiones Compania de Seguros (£69m) and associates held by CrescentReal Estate Holdings LLC (£89m).


19 Investment in associates and joint ventures continuedSummarised financial information of the Group’s associates and joint ventures is set out below:

2009 2008

Joint JointAssociates ventures Associates ventures

£m £m £m £m

Property, plant and equipment 1,174 98 788 104Financial investments 772 6 124 –Trading portfolio assets 426 – – –Loans to banks and customers 712 3,124 271 2,883Other assets 1,855 293 1,343 418

Total assets 4,939 3,521 2,526 3,405

Deposits from banks and customers 2,200 2,751 1,376 2,207Trading portfolio liabilities 370 107 – –Other liabilities 1,666 380 985 890Shareholders’ equity 703 283 165 308

Total liabilities and shareholders’ equity 4,939 3,521 2,526 3,405

Net income 1,022 391 859 357Operating expenses (1,045) (342) (732) (364)

Profit before tax (23) 49 127 (7)

(Loss)/profit after tax (96) 30 52 (11)

The amounts included above, which include the entire assets, liabilities and net income of the investees, not just the Group’s share, are based on accountsmade up to 31st December 2009 with the exception of certain undertakings for which the amounts are based on accounts made up to dates not earlierthan three months before the balance sheet date.

The Group’s share of commitments and contingencies of its associates and joint ventures is £5m (2008: £nil).

20 Goodwill

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Net book valueAt beginning of year 7,625 7,014 3,574 3,593Acquisitions 63 400 – –Business disposals/discontinued operations (1,503) (10) (15) –Impairment charge (1) (112) – (37)Exchange and other adjustments (48) 333 (5) 18

At end of year 6,232 7,625 3,554 3,574



20 Goodwill continuedGoodwill is allocated to business operations according to business segments identified by the Group under IFRS 8, as follows:

The Group The Bank

2009 2008a 2009 2008£m £m £m £m

UK Retail Banking 3,146 3,139 3,130 3,130Barclays Commercial Bank 22 10 – –Barclaycard 525 413 220 220GRCB – Western Europe 886 948 110 115GRCB – Emerging Markets 39 49 – –GRCB – Absa 1,116 1,084 – –Barclays Capital 107 95 – –Barclays Global Investors – 1,496 – 15Barclays Wealth 391 391 94 94

Goodwill 6,232 7,625 3,554 3,574

The goodwill disposal relates to Barclays Global Investors. During 2009, the allocation of balances has been updated to reflect certain changes in thebusiness structure.

Goodwill is reviewed annually for impairment, or more frequently when there are indicators that impairment may have occurred, by comparing the carryingvalue to its recoverable amount.

Impairment testing of goodwillThe recoverable amount of each operation’s goodwill is based on value-in-use or fair value less costs to sell calculations. The calculations are based upon discounting expected pre-tax cash flows at a risk adjusted interest rate appropriate to the cash generating unit, the determination of both of whichrequires the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasts are available and to assumptionsregarding the long-term sustainable cash flows. While forecasts are compared with actual performance and external economic data, expected cash flowsnaturally reflect management’s view of future performance.

At 31st December 2009, the goodwill allocated to UK Retail Banking was £3,146m (2008: £3,139m) including £3,130m (2008: £3,130m) relating to Woolwich, the goodwill allocated to GRCB – Absa was £1,116m (2008: £1,084m) and the goodwill allocated to Barclays Global Investors was £nil (2008: £1,496m). The remaining aggregate of goodwill of £1,986m (2008: £1,915m) consists of balances relating to multiple business operations which are not considered individually significant.

Key assumptions used in impairment testing for significant goodwillUK Retail BankingThe recoverable amount of UK Retail Banking has been determined based on a value in use calculation. The calculation uses cash flow predictions based onfinancial budgets approved by management covering a three year period, with a terminal growth rate of 3% applied thereafter. The forecast cash flows havebeen discounted at a rate of 14%. The recoverable amount exceeded the carrying amount including goodwill by £1.2bn. A one percentage point change inthe discount rate or the terminal growth rate would reduce the recoverable amount by £0.7bn and £0.5bn respectively. A reduction in the forecast cashflows of 5% per annum would reduce the recoverable amount by £0.4bn.

Global Retail and Commercial Banking – AbsaThe recoverable amount of GRCB – Absa has been determined based on a value in use calculation. The calculation uses cash flow predictions based onfinancial budgets approved by management covering a three year period, with a terminal growth rate of 6% applied thereafter. The forecast cash flows havebeen discounted at a rate of 14%. The result of the impairment test is not sensitive to reasonably possible changes in key assumptions.

Barclays Global InvestorsAll of the goodwill in Barclays Global Investors has been disposed of following the sale of this business to BlackRock, Inc on 1st December 2009. The value ofthe goodwill was recovered in full as a result of the transaction.

Notea Figures have been restated for the transfer of Barclays Russia from GRCB – Emerging Markets

to GRCB – Western Europe.


21 Intangible assets

2009

Internally Core Mortgagegenerated Other deposit Customer servicing Licences

software software intangibles Brands lists rights and othercost cost cost cost cost cost contracts Total£m £m £m £m £m £m £m £m

The GroupCostAt 1st January 2009 721 328 261 155 1,565 173 426 3,629Acquisitions and disposals of subsidiaries – – – – 1 – 109 110Disposal of discontinued operations (66) – – (2) – – (32) (100)Additions/disposals 264 (36) – – – – 11 239Exchange and other adjustments 44 (55) 40 22 (45) (9) (52) (55)

At 31st December 2009 963 237 301 175 1,521 164 462 3,823

Accumulated amortisation and impairmentAt 1st January 2009 (284) (69) (52) (55) (172) (116) (104) (852)Disposal of discontinued operations 25 – – 2 – – 8 35Disposals 12 4 – – – – – 16Amortisation charge (190) (29) (22) (17) (136) (13) (54) (461)Impairment charge (11) – – (6) – – (10) (27)Exchange and other adjustments (17) 36 (8) (8) (10) 12 24 29

At 31st December 2009 (465) (58) (82) (84) (318) (117) (136) (1,260)

Net book value 498 179 219 91 1,203 47 326 2,563

The BankCostAt 1st January 2009 560 110 7 4 16 173 38 908Acquisitions and disposals of subsidiaries – – – – 2 – 75 77Additions/disposals 116 38 – – – – 4 158Exchange and other adjustments (1) (12) – – (1) (9) – (23)

At 31st December 2009 675 136 7 4 17 164 117 1,120

Accumulated amortisation and impairmentAt 1st January 2009 (204) (22) (3) – (5) (115) (13) (362)Disposals 9 – – – – – – 9Amortisation charge (116) (11) – – (2) (13) 1 (141)Impairment charge (9) – – (6) – – (10) (25)Exchange and other adjustments – 12 – – – 13 1 26

At 31st December 2009 (320) (21) (3) (6) (7) (115) (21) (493)

Net book value 355 115 4 (2) 10 49 96 627



21 Intangible assets continued

2008

Internally Core Mortgagegenerated Other deposit Customer servicing Licences

software software intangibles Brands lists rights and other Total£m £m £m £m £m £m £m £m

The GroupCostAt 1st January 2008 388 188 244 149 524 126 161 1,780Acquisitions and disposals of subsidiaries – 127 17 6 992 – 210 1,352Additions/disposals 274 5 – – – – 3 282Exchange and other adjustments 59 8 – – 49 47 52 215

At 31st December 2008 721 328 261 155 1,565 173 426 3,629

Accumulated amortisation and impairmentAt 1st January 2008 (163) (57) (37) (38) (101) (64) (38) (498)Disposals 11 7 – – – – – 18Amortisation charge (86) (33) (14) (15) (62) (22) (59) (291)Impairment release 3 – – – – – – 3Exchange and other adjustments (49) 14 (1) (2) (9) (30) (7) (84)

At 31st December 2008 (284) (69) (52) (55) (172) (116) (104) (852)

Net book value 437 259 209 100 1,393 57 322 2,777

The BankCostAt 1st January 2008 314 115 5 – 12 126 10 582Acquisitions and disposals of subsidiaries – – – 4 – – 28 32Additions/disposals 237 (6) – – – – – 231Exchange and other adjustments 9 1 2 – 4 47 – 63

At 31st December 2008 560 110 7 4 16 173 38 908

Accumulated amortisation and impairmentAt 1st January 2008 (128) (15) (2) – (3) (63) (3) (214)Disposals 11 – – – – – – 11Amortisation charge (74) (6) (1) – (1) (22) (10) (114)Impairment release 3 – – – – – – 3Exchange and other adjustments (16) (1) – – (1) (30) – (48)

At 31st December 2008 (204) (22) (3) – (5) (115) (13) (362)

Net book value 356 88 4 4 11 58 25 546

Of the Group’s amortisation charge for the year, £447m (2008: £276m) relates to continuing operations.

The impairment release detailed above has been included within other operating expenses.


22 Property, plant and equipment

The Group The Bank

Investment Leased Leasedproperty Property Equipment assets Total Property assets Total

£m £m £m £m £m £m £m £m

2009CostAt 1st January 2009 – 3,624 3,944 304 7,872 1,840 1,915 3,755Acquisitions and disposals of subsidiaries 978 171 5 – 1,154 – – –Disposal of discontinued operations – (120) (99) – (219) – – –Additions/disposals 137 233 387 (37) 720 131 169 300Change in fair value of investment properties 6 – – – 6 – – –Fully depreciated assets written off – (6) (17) – (23) – – –Exchange and other adjustments 86 (74) (23) (201) (212) (15) (11) (26)

At 31st December 2009 1,207 3,830 4,197 66 9,300 1,956 2,073 4,029

Accumulated depreciation and impairmentAt 1st January 2009 – (1,011) (2,144) (43) (3,198) (830) (1,135) (1,965)Acquisitions and disposals of subsidiaries – – 2 – 2 – – –Disposal of discontinued operations – 33 64 – 97 – – –Depreciation charge – (201) (565) (20) (786) (91) (253) (344)Impairment charge – (32) (2) – (34) (12) (1) (13)Disposals – 46 97 1 144 37 60 97Fully depreciated assets written off – 6 17 – 23 – – –Exchange and other adjustments – 31 2 45 78 15 13 28

At 31st December 2009 – (1,128) (2,529) (17) (3,674) (881) (1,316) (2,197)

Net book value 1,207 2,702 1,668 49 5,626 1,075 757 1,832

2008CostAt 1st January 2008 – 2,451 2,995 413 5,859 1,869 1,636 3,505Acquisitions and disposals of subsidiaries – 992 218 – 1,210 1 – 1Additions/disposals – 8 570 (109) 469 (106) 211 105Fully depreciated assets written off – (15) (7) – (22) (15) (5) (20)Exchange and other adjustments – 188 168 – 356 91 73 164

At 31st December 2008 – 3,624 3,944 304 7,872 1,840 1,915 3,755

Accumulated depreciation and impairmentAt 1st January 2008 – (1,044) (1,804) (15) (2,863) (915) (1,041) (1,956)Acquisitions and disposals of subsidiaries – (8) (12) – (20) (3) – (3)Depreciation charge – (124) (475) (31) (630) (67) (234) (301)Impairment charge – – (33) – (33) – (3) (3)Disposals – 168 185 3 356 145 151 296Fully depreciated assets written off – 15 7 – 22 15 5 20Exchange and other adjustments – (18) (12) – (30) (5) (13) (18)

At 31st December 2008 – (1,011) (2,144) (43) (3,198) (830) (1,135) (1,965)

Net book value – 2,613 1,800 261 4,674 1,010 780 1,790

Of the Group’s depreciation charge for the year £759m (2008: £606m) relates to continuing operations.

The fair value of Barclays investment property is based on valuations supported by appropriately qualified independent valuers.

Leased assets represent assets leased to customers under operating leases.

Certain of the Group’s equipment is held on finance leases, see Note 37.



23 Financial liabilities designated at fair value

The Group The Bank The Group The Bank

2009 2008

Contractual Contractual Contractual Contractualamount due amount due amount due amount due

Fair value on maturity Fair value on maturity Fair value on maturity Fair value on maturity£m £m £m £m £m £m £m £m

Debt securities 72,191 77,636 71,303 76,372 61,297 69,197 57,963 65,162Deposits 6,275 6,544 4,581 4,849 10,518 10,109 7,751 7,419Other 7,736 8,811 7,662 8,692 5,077 6,761 4,944 6,553

Financial liabilities designated at fair value 86,202 92,991 83,546 89,913 76,892 86,067 70,658 79,134

At 31st December 2009, the own credit adjustment arose from the fair valuation of £61.5bn of Barclays Capital structured notes (2008: £54.5bn). The movement in Barclays credit spreads in the year affected the fair value of these notes and as a result revaluation losses of £1,820m were recognised in trading income (2008: £1,663m gains).

The cumulative own credit net gain that has been recognised on issued notes is £501m at 31st December 2009 (2008: £2,321m).

24 Other liabilities

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Accruals and deferred income 6,007 6,495 4,854 4,924Sundry creditors 5,972 6,049 1,565 10,365Obligations under finance leases (Note 37) 122 96 4 6

Other liabilities 12,101 12,640 6,423 15,295

Included in the above are Group balances of £10,966m (2008: £11,068m) expected to be settled within no more than 12 months after the balance sheetdate; and balances of £1,135m (2008: £1,572m) expected to be settled more than 12 months after the balance sheet date.

Included in the above are Bank balances of £6,146m (2008: £13,286m) expected to be settled within no more than 12 months after the balance sheet dateand balances of £277m (2008: £2,009m) expected to be settled more than 12 months after the balance sheet date.

Accruals and deferred income includes £108m (2008: £101m) for the Group’s estimated share of levies that will be raised by the Financial ServicesCompensation Scheme (FSCS). The provision is based on estimates of the Group’s market participation in the relevant charging periods and the interestFSCS will pay on the facilities provided by HM Treasury in support of its obligations to depositors of banks declared in default. The total of these facilities isunderstood to be some £20bn.

While it is anticipated that the substantial majority of these facilities will be repaid wholly from recoveries from the institutions concerned, there is the risk of shortfall, such that the FSCS may place additional levies on FSCS participants. It is not currently possible to estimate the amount of potential additionallevies, or the Group’s share, which is expected to be based on a future level of market participation, or the effect that such levies may have upon operatingresults in any particular financial period.


25 Insurance assets and liabilitiesInsurance assetsReinsurance assets are £92m (2008: £123m) and relate principally to the Group’s long-term business. Reinsurers’ share of provisions relating to the Group’sshort-term business are £7m (2008: £32m). The reinsurance assets expected to be recovered after more than one year are £85m (2008: £91m).

Insurance contract liabilities including unit-linked liabilitiesInsurance liabilities comprise the following:

The Group

2009 2008£m £m

Insurance contract liabilities:– linked liabilities 139 125– non-linked liabilities 1,886 1,908Provision for claims 115 119

Insurance contract liabilities including unit-linked liabilities 2,140 2,152

Insurance contract liabilities relate principally to the Group’s long-term business. Insurance contract liabilities associated with the Group’s short-term non-life business are £132m (2008: £73m).

Movements in insurance liabilities and reinsurance assetsMovements in insurance assets and insurance contract liabilities were as follows:

The Group

2009 2008

Gross Reinsurance Net Gross Reinsurance Net£m £m £m £m £m £m

At beginning of year 2,152 (123) 2,029 3,903 (157) 3,746Change in year (12) 31 19 (1,751) 34 (1,717)

At end of year 2,140 (92) 2,048 2,152 (123) 2,029

Assumptions used to measure insurance liabilitiesThe assumptions that have the greatest effect on the measurement of the amounts recognised above, and the processes used to determine them were as follows:

Long-term business – linked and non-linkedMortality – mortality estimates are based on standard industry and national mortality tables, adjusted where appropriate to reflect the Group’s ownexperience. A margin is added to ensure prudence – for example, future mortality improvements for annuity business.

Renewal expenses level and inflation – expense reserves are a small part of overall insurance liabilities, however, increases in expenses caused byunanticipated inflation or other unforeseen factors could lead to expense reserve increases. Expenses are therefore set using prudent assumptions. Initialrenewal expense levels are set by considering expense forecasts for the business and, where appropriate, building in a margin to allow for the increasingburden of fixed costs on the UK closed life book of business. The inflation assumption is set by adding a margin to the market rate of inflation implied byindex-linked gilt yields.

Short-term businessShort-term business – for single premium policies the proportion of unearned premiums is calculated based on estimates of the frequency and severity of incidents.

Changes in assumptionsThere have been no changes in assumptions in 2009 that have had a material effect on the financial statements.

Uncertainties associated with cash flows related to insurance contracts and risk management activitiesThe assumptions used to determine uncertainties in cash flows and the processes used to manage risk were as follows:

Long-term insurance contracts (linked and non-linked)For long-term insurance contracts where death is the insured risk, the most significant factors that could detrimentally affect the frequency and severity ofclaims are the incidence of disease, such as AIDS, or general changes in lifestyle, such as in eating, exercise and smoking. Where survival is the insured risk,advances in medical care and social conditions are the key factors that increase longevity.

The Group manages its exposure to risk by operating in part as a unit-linked business, prudent product design, applying strict underwriting criteria,transferring risk to reinsurers, managing claims and establishing prudent reserves.

Short-term insurance contractsFor payment protection contracts where inability to make payments under a loan contract is the insured risk, the most significant factors are the health ofthe policyholder and the possibility of unemployment which depends upon, among other things, long-term and short-term economic factors. The Groupmanages its exposure to such risks through prudent product design, efficient claims management, prudent reserving methodologies and bases, regularproduct, economic and market reviews and regular adequacy tests on the size of the reserves.

Absa insures property and motor vehicles, for which the most significant factors that could effect the frequency and severity of claims are climatic changeand crime. Absa manages its exposure to risk by diversifying insurance risks accepted and transferring risk to reinsurers.



25 Insurance assets and liabilities continuedSensitivity analysisThe following table presents the sensitivity of the level of insurance contract liabilities disclosed in this note to movements in the actuarial assumptions usedto calculate them. The percentage change in variable is applied to a range of existing actuarial modelling assumptions to derive the possible impact on netprofit after tax. The disclosure is not intended to explain the impact of a percentage change in the insurance assets and liabilities disclosed above.

The Group 2009 2008

Net profit Net profitChange in after tax Change in after tax

variable impact variable impact% £m % £m

Long-term insurance contracts:Improving mortality (annuitants only) 10 – 10 1Worsening of mortality (assured lives only) 10 14 10 20Worsening of base renewal expense level 20 11 20 19Worsening of expense inflation rate 10 3 10 1

Short-term insurance contracts:Worsening of claim expense assumptions 10 5 10 3

Any change in net profit after tax would result in a corresponding increase or decrease in shareholders’ equity.

The above analyses are based on a change in a single assumption while holding all other assumptions constant. In practice this is unlikely to occur.

Options and guaranteesThe Group’s contracts do not contain options or guarantees that could confer material risk.

Concentration of insurance riskThe Group considers that the concentration of insurance risk that is most relevant to the Group financial statements is according to the type of cover offeredand the location of insured risk. The following table shows the maximum amounts payable under all of the Group’s insurance products. It ignores theprobability of insured events occurring and the contribution from investments backing the insurance policies. The table shows the broad product types andthe location of the insured risk, before and after the impact of reinsurance that represents the risk that is passed to other insurers.

2009 2008

Before After Before AfterReinsurance Reinsurance Reinsurance Reinsurance Reinsurance Reinsurance

£m £m £m £m £m £m

The GroupTotal benefits insured by product typeLong term insurance contracts 13,405 (1,547) 11,858 19,193 (3,591) 15,602Short term insurance contracts 49,359 (4,145) 45,214 36,228 (2,735) 33,493

Total benefits insured 62,764 (5,692) 57,072 55,421 (6,326) 49,095

Total benefits insured by geographic locationUnited Kingdom 5,727 (363) 5,364 8,120 (525) 7,595Other European Union 1,724 (20) 1,704 6,519 (2,305) 4,214Africa 55,313 (5,309) 50,004 40,782 (3,496) 37,286

Total benefits insured 62,764 (5,692) 57,072 55,421 (6,326) 49,095

Reinsurer credit riskFor the long-term business, reinsurance programmes are in place to restrict the amount of cover on any single life. The reinsurance cover is spread acrosshighly rated companies to diversify the risk of reinsurer solvency. Net insurance reserves include a margin to reflect reinsurer credit risk.

26 Subordinated liabilitiesSubordinated liabilities include accrued interest and comprise dated and undated loan capital as follows:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Undated loan capital 8,148 13,673 8,207 13,738Dated loan capital 17,668 16,169 16,686 15,430

25,816 29,842 24,893 29,168


26 Subordinated liabilities continuedUndated loan capital

The Group The Bank

2009 2008 2009 2008Notes £m £m £m £m

Non-convertibleThe Bank6% Callable Perpetual Core Tier One Notes a,p 424 487 424 4876.86% Callable Perpetual Core Tier One Notes (US$1,000m) a,p 784 1,118 784 1,1185.3304% Step-up Callable Perpetual Reserve Capital Instruments b,q 560 652 560 6525.926% Step-up Callable Perpetual Reserve Capital Instruments (US$1,350m) c,r 928 1,109 928 1,1096.3688% Step-up Callable Perpetual Reserve Capital Instruments m,ac 567 600 567 6007.434% Step-up Callable Perpetual Reserve Capital Instruments (US$1,250m) n,ad 866 1,055 866 1,05514% Step-up Callable Perpetual Reserve Capital Instruments e,s 2,608 2,514 2,608 2,514Junior Undated Floating Rate Notes (US$121m) d,t 75 83 134 1487.7% Undated Subordinated Notes (US$99m, 2008: US$2,000m) o,af 65 1,644 65 1,644Undated Floating Rate Primary Capital Notes Series 3 d,u 145 147 145 1479.25% Perpetual Subordinated Bonds (ex-Woolwich plc) f,v 95 232 95 2329% Permanent Interest Bearing Capital Bonds g,w 43 120 43 1208.25% Undated Subordinated Notes o,ae 152 1,092 152 1,0927.125% Undated Subordinated Notes h,x 180 620 180 6206.875% Undated Subordinated Notes i,y 151 729 151 7296.375% Undated Subordinated Notes j,z 147 526 147 5266.125% Undated Subordinated Notes k,aa 220 666 220 6666.5% Undated Subordinated Notes (FFr 1,000m) – 151 – 1515.03% Reverse Dual Currency Undated Subordinated Loan (Yen 8,000m) l,ab 55 51 55 515% Reverse Dual Currency Undated Subordinated Loan (Yen 12,000m) l,ab 83 77 83 77

Undated loan capital – non-convertible 8,148 13,673 8,207 13,738

Security and subordinationNone of the undated loan capital is secured.

The Junior Undated Floating Rate Notes (the ‘Junior Notes’) rank behind the claims against the Bank of depositors and other unsecured unsubordinatedcreditors and holders of dated loan capital.

All other issues of undated loan capital rank pari passu with each other and behind the claims of the holders of the Junior Notes, except for the 6% and6.86% Callable Perpetual Core Tier One Notes (the ‘TONs’) and the 5.3304%, 5.926%, 6.3688%, 7.434% and 14% Step-up Callable Perpetual ReserveCapital Instruments (the ‘RCIs’) (such issues, excluding the TONs and the RCIs, being the ‘Undated Notes and Loans’).

The TONs and the RCIs rank pari passu with each other and behind the claims of the holders of the Undated Notes and Loans.

InterestNotes a These TONs bear a fixed rate of interest until 2032. After that date, in the event that the TONs are not redeemed, the TONs will bear interest at rates fixed

periodically in advance, based on London interbank rates.

b These RCIs bear a fixed rate of interest until 2036. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixedperiodically in advance, based on London interbank rates.

c These RCIs bear a fixed rate of interest until 2016. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixedperiodically in advance, based on London interbank rates.

d These Notes bear interest at rates fixed periodically in advance, based on London interbank rates.

e These RCIs bear a fixed rate of interest until 2019. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixedperiodically in advance, based on London interbank rates.

f These Bonds bear a fixed rate of interest until 2021. After that date, in the event that the Bonds are not redeemed, the coupon will be reset to a fixedmargin over a reference gilt rate for a further period of five years.

g The interest rate on these Bonds is fixed for the life of this issue.

h These Notes bear a fixed rate of interest until 2020. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixedmargin over a reference gilt rate for a further period of five years.

i These Notes bear a fixed rate of interest until 2015. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixedmargin over a reference gilt rate for a further period of five years.

j These Notes bear a fixed rate of interest until 2017. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixedmargin over a reference gilt rate for a further period of five years.

k These Notes bear a fixed rate of interest until 2027. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixedmargin over a reference gilt rate for a further period of five years.



26 Subordinated liabilities continuedl These Loans bear a fixed rate of interest until 2028 based on a US Dollar principal amount, but the interest payments have been swapped, resulting in a

Yen interest rate payable, which is fixed periodically in advance based on London interbank rates. After that date, in the event that the Loans are notredeemed, the Loans will bear Yen interest rates fixed periodically in advance, based on London interbank rates.

m These RCIs bear a fixed rate of interest until 2019. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixedperiodically in advance, based on London interbank rates.

n These RCIs bear a fixed rate of interest until 2017. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixedperiodically in advance, based on London interbank rates.

o These Notes bear a fixed rate of interest until 2018. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance, based on London interbank rates.

Barclays Bank PLC is not obliged to make a payment of interest on its Undated Notes and Loans excluding the 9.25% Perpetual Subordinated Bonds, 7.7% Undated Subordinated Notes and 8.25% Undated Subordinated Notes if, in the preceding six months, a dividend has not been declared or paid onany class of shares of Barclays PLC or, in certain cases, any class of preference shares of the Bank. The Bank is not obliged to make a payment of interest onits 9.25% Perpetual Subordinated Bonds if, in the immediately preceding 12 months interest period, a dividend has not been paid on any class of its sharecapital. Interest not so paid becomes payable in each case if such a dividend is subsequently paid or in certain other circumstances. During the year, theBank declared and paid dividends on its ordinary shares and on all classes of preference shares.

No payment of principal or any interest may be made unless the Bank satisfies a specified solvency test.

The Bank may elect to defer any payment of interest on the 7.7% Undated Subordinated Notes and 8.25% Undated Subordinated Notes. Until such timeas any deferred interest has been paid in full, neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of itsordinary shares, preference shares, or other share capital or satisfy any payments of interest or coupons on certain other junior obligations.

The Bank may elect to defer any payment of interest on the RCIs (b, c, e, m and n above). Any such deferred payment of interest must be paid on the earlierof (i) the date of redemption of the RCIs, (ii) the coupon payment date falling on or nearest to the tenth anniversary of the date of deferral of such payment,and (iii) in respect of e above only, substitution. Whilst such deferral is continuing, neither the Bank nor Barclays PLC may declare or pay a dividend, subjectto certain exceptions, on any of its ordinary shares or preference shares.

The Bank may elect to defer any payment of interest on the TONs if it determines that it is, or such payment would result in it being, in non-compliancewith capital adequacy requirements and policies of the FSA. Any such deferred payment of interest will only be payable on a redemption of the TONs. Untilsuch time as the Bank next makes a payment of interest on the TONs, neither the Bank nor Barclays PLC may (i) declare or pay a dividend, subject tocertain exceptions, on any of their respective ordinary shares or Preference Shares, or make payments of interest in respect of the Bank’s Reserve CapitalInstruments and (ii) certain restrictions on the redemption, purchase or reduction of their respective share capital and certain other securities also apply.

RepaymentNotesp These TONs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June 2032.

q These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2036.

r These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2016.

s These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June 2019.

t These Notes are repayable, at the option of the Bank, in whole or in part on any interest payment date.

u These Notes are repayable, at the option of the Bank, in whole on any interest payment date.

v These Bonds are repayable, at the option of the Bank, in whole in 2021, or on any fifth anniversary thereafter.

w These Bonds are repayable, at the option of the Bank, in whole at any time.

x These Notes are repayable, at the option of the Bank, in whole in 2020, or on any fifth anniversary thereafter.

y These Notes are repayable, at the option of the Bank, in whole in 2015, or on any fifth anniversary thereafter.

z These Notes are repayable, at the option of the Bank, in whole in 2017, or on any fifth anniversary thereafter.

aa These Notes are repayable, at the option of the Bank, in whole in 2027, or on any fifth anniversary thereafter.

ab These Loans are repayable, at the option of the Bank, in whole in 2028, or on any fifth anniversary thereafter.

ac These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2019.

ad These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2017.

ae These Notes are repayable, at the option of the Bank, in whole on any interest payment date falling in or after December 2018.

af These Notes are repayable, at the option of the Bank, in whole on any interest payment date falling in or after April 2018.

In addition, each issue of undated loan capital is repayable, at the option of the Bank, in whole for certain tax reasons, either at any time, or on an interestpayment date. There are no events of default except non-payment of principal or mandatory interest.

Any repayments require the prior notification to the FSA.

All issues of undated loan capital have been made in the eurocurrency market and/or under Rule 144A, and no issues have been registered under the USSecurities Act of 1933.


26 Subordinated liabilities continuedDated loan capitalDated loan capital is issued by the Bank for the development and expansion of the Group’s business and to strengthen its capital base by Barclays BankSpain SA (Barclays Spain), Barclays Bank of Botswana Ltd (BBB), Barclays Bank Zambia PLC (Barclays Zambia) and Barclays Bank of Kenya (Barclays Kenya)to enhance their respective capital bases and by Absa and Barclays Bank of Ghana Ltd (BBG) for general corporate purposes. It comprises:

The Group The Bank

2009 2008 2009 2008Notes £m £m £m £m

Non-convertibleThe Bank7.4% Subordinated Notes 2009 (US$400m) – 275 – 275Subordinated Fixed to CMS-Linked Notes 2009 (¤31m) – 31 – 3112% Unsecured Capital Loan Stock 2010 a 27 27 27 275.75% Subordinated Notes 2011 (¤1,000m) a 853 943 853 9435.25% Subordinated Notes 2011 (¤250m) (ex-Woolwich plc) a 246 260 246 2605.015% Subordinated Notes 2013 (US$150m) a 99 112 99 1124.875% Subordinated Notes 2013 (¤750m) a 693 750 693 750Callable Floating Rate Subordinated Notes 2015 (US$1,500m) b,j 927 1,031 927 1,0314.38% Fixed Rate Subordinated Notes 2015 (US$75m) a 51 88 51 884.75% Fixed Rate Subordinated Notes 2015 (US$150m) a 103 81 103 81Floating Rate Subordinated Step-up Callable Notes 2016 (US$750m) b,j 463 514 463 514Callable Floating Rate Subordinated Notes 2016 (¤1,250m) b,j 1,115 1,211 1,115 1,211Callable Floating Rate Subordinated Notes 2017 (US$500m) b,j 309 343 309 34310.125% Subordinated Notes 2017 (ex-Woolwich plc) g,j 107 109 107 109Floating Rate Subordinated Step-up Callable Notes 2017 (US$1,500m) b,j 926 1,029 926 1,029Floating Rate Subordinated Step-up Callable Notes 2017 (¤1,500m) b,j 1,337 1,444 1,337 1,4446.05% Fixed Rate Subordinated Notes 2017 (US$2,250m) a 1,505 1,856 1,505 1,856Floating Rate Subordinated Notes 2018 (¤40m) b 36 38 36 386% Fixed Rate Subordinated Notes due 2018 (¤1,750m) a 1,641 1,767 1,641 1,767CMS-Linked Subordinated Notes due 2018 (¤100m) b 92 100 92 100CMS-Linked Subordinated Notes due 2018 (¤135m) b 124 135 124 135Floating Rate Subordinated Notes 2019 (¤50m) b 43 47 43 47Callable Fixed/Floating Rate Subordinated Notes 2019 (¤1,000m) h 915 984 915 9849.5% Subordinated Bonds 2021 (ex-Woolwich plc) a 276 298 276 298Subordinated Floating Rate Notes 2021 (¤100m) b 87 94 87 9410% Fixed Rate Subordinated Notes 2021 a 2,022 – 2,022 –10.179% Fixed Rate Subordinated Notes 2021 (US$1,521m) a 942 – 942 –Subordinated Floating Rate Notes 2022 (¤50m) b 45 49 45 49Subordinated Floating Rate Notes 2023 (¤50m) b 45 48 45 48Fixed/Floating Rate Subordinated Callable Notes 2023 m,j 568 571 568 5715.75% Fixed Rate Subordinated Notes 2026 a 631 690 631 6905.4% Reverse Dual Currency Subordinated Loan 2027 (Yen 15,000m) i 105 128 105 1286.33% Subordinated Notes 2032 a 52 53 52 53Subordinated Floating Rate Notes 2040 (¤100m) b 89 96 89 96Other loans from subsidiaries – – 212 228Barclays Bank SA, Spain (Barclays Spain)Subordinated Floating Rate Capital Notes 2011 (¤11m) b 4 11 – –Absa14.25% Subordinated Callable Notes 2014 (ZAR 3,100m) – 240 – –10.75% Subordinated Callable Notes 2015 (ZAR 1,100m) c,j 95 85 – –Subordinated Callable Notes 2015 (ZAR 400m) d,j 36 30 – –8.75% Subordinated Callable Notes 2017 (ZAR 1,500m) e,j 129 115 – –Subordinated Callable Notes 2018 (ZAR 1,886m) d,j 173 144 – –8.8% Subordinated Fixed Rate Callable Notes 2019 (ZAR 1,725m) n,j 143 146 – –Subordinated Callable Notes 2019 (ZAR 3,000m) d,j 268 – – –8.1% Subordinated Callable Notes 2020 (ZAR 2,000m) f,j 160 130 – –Subordinated Callable Notes 2028 (ZAR 1,500m) d,j 127 – – –Barclays Bank of Ghana Ltd (BBG)14% Fixed Rate BBG Subordinated Callable Notes 2016 (GHC 10m) a,j 4 5 – –Barclays Bank of Kenya (Barclays Kenya)Floating Rate Subordinated Notes 2014 (KES 968m) o 8 8 – –Floating Rate Subordinated Notes 2015 (KES 740m) o 6 6 – –Fixed Rate Subordinated Notes 2015 (KES 1,260m) a 10 12 – –Barclays Bank Zambia PLC (Barclays Zambia)Subordinated Unsecured Floating Rate Capital Notes 2016 (ZMK 49,232m) p 6 – – –

Dated loan capital – non-convertible 17,643 16,134 16,686 15,430



26 Subordinated liabilities continued

The Group The Bank

2009 2008 2009 2008£m £m £m £m

ConvertibleBarclays Bank of Botswana (BBB)Subordinated Unsecured Fixed Rate Capital Notes 2014 (BWP 190m) j,k 18 17 – –Barclays Bank Zambia PLC (Barclays Zambia)Subordinated Unsecured Floating Rate Capital Notes 2015 (ZMK 49,086m) j,l 7 7 – –AbsaRedeemable cumulative option-holding preference shares (ZAR 147m) – 11 – –

Total convertible 25 35 – –

None of the Group’s dated loan capital is secured. The debt obligations of the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absarank ahead of the interests of holders of their equity and the dated loan capital has been issued on the basis that the claims thereunder are subordinated tothe respective claims of their depositors and other unsecured unsubordinated creditors.

InterestNotesa The interest rates on these Notes are fixed for the life of those issues.

b These Notes bear interest at rates fixed periodically in advance based on London or European interbank rates.

c These Notes bear a fixed rate of interest until 2010. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance based on Johannesburg interbank acceptance rates.

d These Notes bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.

e These Notes bear a fixed rate of interest until 2012. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance based on Johannesburg interbank acceptance rates.

f These Notes bear a fixed rate of interest until 2015. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance based on Johannesburg interbank acceptance rates.

g These Notes bear a fixed rate of interest until 2012. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixedmargin over a reference gilt rate for a further period of five years.

h These Notes bear a fixed rate of interest until 2014. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance based on European interbank rates.

i This Loan bears a fixed rate of interest based on a US Dollar principal amount, but the interest payments have been swapped, resulting in a Yen interestrate payable which is fixed periodically in advance based on London interbank rates.

j Repayable at the option of the issuer, prior to maturity, on conditions governing the respective debt obligations, some in whole or in part, and some onlyin whole.

k These Notes bear interest at rates fixed periodically in advance based on the Bank of Botswana Certificate Rate. All of these Notes will be compulsorilyconverted to Preference Shares of BBB, having a total par value equal in sum to the principal amount of Notes outstanding at the time of conversion,should BBB experience pre-tax losses in excess of its retained earnings and other capital surplus accounts.

l These Notes bear interest at rates fixed periodically in advance based on the Bank of Zambia Treasury Bill rate. All of these Notes will be compulsorilyconverted to Preference Shares of Barclays Zambia, having a total par value equal in sum to the principal amount of Notes outstanding at the time ofconversion, should Barclays Zambia experience pre-tax losses in excess of its retained earnings and other capital surplus accounts.

m These Notes bear a fixed rate of interest until 2018. After that date in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance based on London interbank rates.

n These Notes bear a fixed rate of interest until 2014. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixedperiodically in advance based on Johannesburg interbank acceptance rates.

o These Notes bear interest at rates fixed periodically in advance based on the Central Bank of Kenya Treasury Bill rates.

p These Notes bear interest at rates fixed periodically in advance based on the Central Bank of Zambia Treasury Bill rates.

The 7.4% Subordinated Notes 2009 (the ‘7.4% Notes’) issued by the Bank were registered under the US Securities Act of 1933. All other issues of datedloan capital by the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa, which were made in non-US markets, have not been soregistered.


26 Subordinated liabilities continuedRepayment termsUnless otherwise indicated, the Group’s dated loan capital outstanding at 31st December 2009 is redeemable only on maturity, subject in particular cases,to provisions allowing an early redemption in the event of certain changes in tax law or, in the case of BBB and Barclays Zambia to certain changes inlegislation or regulations.

Any repayments prior to maturity require in the case of the Bank, the prior notification to the FSA, in the case of BBB, the prior approval of the Bank ofBotswana, in the case of Barclays Zambia, the prior approval of the Bank of Zambia, and in the case of Absa, the prior approval of the South African Registrarof Banks.

There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity.

27 Provisions

Undrawncontractually

committedfacilities

Redundancy andOnerous and re- guarantees Sundry

contracts structuring provided provisions Total£m £m £m £m £m

The GroupAt 1st January 2009 50 118 109 258 535Acquisitions and disposals of subsidiaries – (2) 1 (6) (7)Exchange and other adjustments – 4 2 – 6Additions 51 269 119 125 564Amounts used (27) (201) (21) (142) (391)Unused amounts reversed (8) (26) (48) (37) (119)Amortisation of discount 2 – – – 2

At 31st December 2009 68 162 162 198 590

The BankAt 1st January 2009 48 110 100 132 390Acquisitions and disposals of subsidiaries 2 (1) – (3) (2)Exchange and other adjustments – 3 2 2 7Additions 41 216 159 16 432Amounts used (27) (155) (21) (76) (279)Unused amounts reversed (8) (25) (44) (9) (86)Amortisation of discount 2 – – – 2

At 31st December 2009 58 148 196 62 464

The GroupAt 1st January 2008 64 82 475 209 830Acquisitions and disposals of subsidiaries 9 (9) – (1) (1)Exchange and other adjustments 2 – 63 15 80Additions 12 269 461 102 844Amounts used (41) (213) (794) (42) (1,090)Unused amounts reversed – (11) (96) (25) (132)Amortisation of discount 4 – – – 4

At 31st December 2008 50 118 109 258 535

The BankAt 1st January 2008 70 67 579 93 809Acquisitions and disposals of subsidiaries 1 – (976) (2) (977)Exchange and other adjustments 2 2 105 4 113Additions 12 248 456 61 777Amounts used (41) (197) 26 (15) (227)Unused amounts reversed – (10) (90) (9) (109)Amortisation of discount 4 – – – 4

At 31st December 2008 48 110 100 132 390



27 Provisions continuedProvisions expected to be recovered or settled for the Group within no more than 12 months after 31st December 2009 were £466m (2008: £333m).

Provisions expected to be recovered or settled for the Bank within no more than 12 months after 31st December 2009 were £408m (2008: £255m).

Sundry provisions are made with respect to commission clawbacks, warranties and litigation claims.

28 SecuritisationsThe Group was party to securitisation transactions involving Barclays residential mortgage loans, business loans and credit card balances. In addition, the Group acts as a conduit for commercial paper, whereby it acquires static pools of residential mortgage loans from other lending institutions forsecuritisation transactions.

In these transactions, the assets, or interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a specialpurpose entity, or to a trust which then transfers its beneficial interests to a special purpose entity, which then issues floating rate debt securities to third-party investors.

Securitisations may, depending on the individual arrangement result in continued recognition of the securitised assets and the recognition of the debtsecurities issued in the transaction; lead to partial continued recognition of the assets to the extent of the Group’s continuing involvement in those assets orto derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or retained in the transfer. Fullderecognition only occurs when the Group transfers both its contractual right to receive cash flows from the financial assets, or retains the contractual rightto receive the cash flows, but assumes a contractual obligation to pay the cash flows to another party without material delay or reinvestment, and alsotransfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk.

The following table shows the carrying amount of securitised assets, stated at the amount of the Group’s continuing involvement where appropriate,together with the associated liabilities, for each category of asset on the balance sheet:

2009 2008

Contractual ContractualCarrying amount of Carrying amount of

amount of associated amount of associatedassets liabilities assets liabilities

£m £m £m £m

The GroupLoans and advances to customersResidential mortgage loans 10,374 (10,738) 12,754 (13,172)Credit card receivables 1,288 (1,288) 1,888 (2,109)Other personal lending 94 (124) 212 (256)Wholesale and corporate loans and advances 4,835 (5,999) 7,702 (8,937)

Total 16,591 (18,149) 22,556 (24,474)

Assets designated at fair value through profit or lossRetained interest in residential mortgage loans 26 316

The BankLoans and advances to customersResidential mortgage loans 11,323 (11,719) 8,073 (8,491)Credit card receivables 1,299 (1,299) 1,888 (2,109)Other personal lending – – – –Wholesale and corporate loans and advances 5,751 (7,147) 7,702 (8,937)

Total 18,373 (20,165) 17,663 (19,537)

Assets designated at fair value through profit or lossRetained interest in residential mortgage loans 26 316

Balances included within loans and advances to customers represent securitisations where substantially all the risks and rewards of the asset have beenretained by the Group.

The excess of total associated liabilities over the carrying amount of assets primarily reflects timing differences in the receipt and payment of cash flows, andforeign exchange movements where the assets and associated liabilities are denominated in different currencies.

Balances included within loans and advances to customers include securitisations where the Bank has repurchased liabilities originally issued by itssubsidiaries to third-party investors.

Retained interests in residential mortgage loans are securities which represent a continuing exposure to the prepayment and credit risk in the underlyingsecuritised assets. The total amount of the loans was £14,795m (2008: £31,734m) for the Group and £14,795m (2008: £31,734m) for the Bank. The retained interest is initially recorded as an allocation of the original carrying amount based on the relative fair values of the portion derecognised and the portion retained.


29 Retirement benefit obligationsPension schemesThe UK Retirement Fund (UKRF), which is the main scheme of the Group, amounting to 93% of all the Group’s schemes in terms of benefit obligations,comprises ten sections.

The 1964 Pension SchemeMost employees recruited before July 1997 are members of this non-contributory defined benefit scheme. Pensions are calculated by reference to serviceand pensionable salary and are normally subject to a deduction from State pension age.

The Retirement Investment Scheme (RIS)A defined contribution plan for most joiners between July 1997 and 1st October 2003. This was closed to new entrants on 1st October 2003 and the largemajority of existing members of the RIS transferred to Afterwork in respect of future benefit accrual with effect from 1st January 2004. There are no longerany active members of the RIS.

The Pension Investment Plan (PIP)A defined contribution plan created from 1st July 2001 to provide benefits for employees of Barclays Capital.

AfterworkCombines a contributory cash balance element with a voluntary defined contribution element. The majority of new employees outside of Barclays Capitalsince 1st October 2003 are eligible to join Afterwork. In addition, the large majority of active members of the RIS (now closed) were transferred to Afterworkin respect of future benefit accrual after 1st January 2004.

Career Average SectionThe Career Average Section was established in the UKRF with effect from 1st May 2004 following the transfer of members from the Woolwich PensionFund. The Career Average Section is a non-contributory career average scheme and was closed to new entrants on 1st December 2006.

1951 Fund Section, AP89 Section, BCPS Section, CCS Section and Mercantile Section Five new sections were established in the UKRF with effect from 31st March 2007 following the merger of the UKRF with five smaller schemes sponsoredfrom within the Group. All five sections are closed to new members.

The 1951 Fund Section, AP89 Section and Mercantile Section provide final salary benefits calculated by reference to service and pensionable salary.

The BCPS and CCS Sections provide defined contribution benefits. The benefits built up in these sections in relation to service before 6th April 1997 aresubject to a defined benefit minimum.

In addition, the costs of ill-health retirements and death in service benefits are generally borne by the UKRF for each of the ten sections. From November2008, members were given the option to contribute by way of salary sacrifice to the UKRF.

On 10th September 2009, the Trust Deed was amended such that with effect from 1st April 2010 the following sections of the UKRF will close to theaccrual of future pension benefits: 1964 Pension Scheme; AP89 Section; 1951 Fund Section; Mercantile Section; Career Average Section; and CCS Section.Members of these sections will be eligible to accrue future service pension benefits in either Afterwork or PIP from 1st April 2010. This gave rise to therecognition of a curtailment during the year of £487m, the recognition of actuarial loss of £79m and an additional cost of £37m included in other staff costs.

GovernanceThe UKRF operates under trust law and is managed and administered on behalf of the members in accordance with the terms of the Trust Deed and allrelevant legislations. The Corporate Trustee is Barclays Pension Funds Trustees Limited (BPFTL), a private limited company incorporated on 20th December1990 and is a wholly owned subsidiary of Barclays Bank PLC. The Trustee is the legal owner of the assets of the UKRF which are held separately from theassets of the Group.

The Trustee Board comprises six Management Directors selected by Barclays, of whom three are independent Directors with no relationship with Barclays orthe UKRF, and three are Member Nominated Directors. In addition there are three Alternate Management Directors and three Alternate Member NominatedDirectors. Member Nominated Directors are selected from those eligible active staff and pensioner members who apply to be considered for the role.

The Pensions Act 2004 (the Act) requires corporate trustees to take responsibility for making arrangements for the nomination and selection of MemberNominated Directors (MNDs). A formal procedure has been in place since 1st September 2007, which is fully compliant with the legal requirements andreflects best practice. Eligibility for nomination and selection is open to all members of the UKRF but excludes those in receipt of solely spouses, civilpartners, dependants or ex-spouse participants pensions, deferred pensioners and members with eligibility for death benefits only.

Under the Act, the Bank and the Trustee must agree on the funding rate, including a recovery plan to fund any deficit against the scheme specific statutoryfunding objective. The first ongoing funding valuation to be completed under this legislation was carried out as at 30th September 2007.

There are other pension schemes (both defined benefit and defined contribution) in the UK and overseas. The same principles of pension governanceapplies to UK based schemes, although different legislation covers overseas schemes where, in most cases, the Bank has the power to determine thefunding rate.



29 Retirement benefit obligations continuedThe following tables present an analysis of defined benefit obligation and fair value of plan assets for all the Group’s pension schemes and post-retirementbenefits (the latter are unfunded) and present the amounts recognised in the income statement including those related to post-retirement health care.

2009 2008

Other post- Other post-retirement retirement

Pensions benefits Total Pensions benefits Total£m £m £m £m £m £m

Income statement chargeCurrent service cost 281 10 291 299 2 301Interest cost 992 9 1,001 991 8 999Expected return on scheme assets (935) – (935) (1,175) – (1,175)Recognised actuarial (gain)/loss 96 – 96 (23) (1) (24)Past service cost 6 – 6 2 (8) (6)Curtailment or settlements (473) – (473) (5) – (5)

Total included in staff costs (33) 19 (14) 89 1 90

Staff costs are included in other operating expenses. Of the other post retirement benefit costs £16m relate to continuing operations (2008: £1m).

Change in benefit obligation

2009 2008

Post-retirement Post-retirementPensions benefits Total Pensions benefits Total

UK Overseas UK Overseas UK Overseas UK Overseas£m £m £m £m £m £m £m £m £m £m

The GroupBenefit obligation at beginning of the year (14,395) (1,220) (43) (125) (15,783) (16,563) (913) (60) (98) (17,634)Current service cost (254) (27) (1) (9) (291) (276) (23) – (2) (301)Interest cost (941) (51) (3) (6) (1,001) (946) (45) (3) (5) (999)Past service cost (1) – – – (1) (2) (11) 7 – (6)Curtailments or settlements 482 (7) – 1 476 7 2 – – 9 Actuarial (loss)/gain (4,757) (33) (3) 7 (4,786) 2,807 – 11 (5) 2,813 Contributions by plan participants (2) (5) – – (7) (20) (3) – – (23)Benefits paid 659 58 1 6 724 598 42 2 9 651Business disposals – 9 – 6 15 – – – – – Exchange and other adjustments – (1) (16) 25 8 – (269) – (24) (293)

Benefit obligation at end of the year (19,209) (1,277) (65) (95) (20,646) (14,395) (1,220) (43) (125) (15,783)

The BankBenefit obligation at beginning of the year (14,395) (269) (54) (17) (14,735) (16,563) (198) (75) (15) (16,851)Current service cost (254) (6) – – (260) (276) (8) – – (284)Interest cost (941) (14) (2) (1) (958) (946) (13) (3) (1) (963)Past service cost (1) – – – (1) (2) – 7 – 5Curtailments or settlements 482 – – 1 483 7 – – – 7Actuarial (loss)/gain (4,757) (5) (3) 4 (4,761) 2,807 10 11 – 2,828Contributions by plan participants (2) (1) – – (3) (20) (1) – – (21)Benefits paid 659 10 1 1 671 598 9 1 6 614Exchange and other adjustments – 40 (1) 1 40 – (68) 5 (7) (70)

Benefit obligation atend of the year (19,209) (245) (59) (11) (19,524) (14,395) (269) (54) (17) (14,735)


29 Retirement benefit obligations continuedThe benefit obligation arises from plans that are wholly unfunded and wholly or partly funded as follows:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Unfunded obligations (288) (297) (100) (81)Wholly or partly funded obligations (20,358) (15,486) (19,424) (14,654)

Total (20,646) (15,783) (19,524) (14,735)

Change in plan assets

2009 2008



The GroupFair value of plan assets at beginning of the year 13,537 959 – – 14,496 17,231 796 – – 18,027Expected return on plan assets 904 31 – – 935 1,134 41 – – 1,175 Employer contribution 525 76 1 6 608 336 71 2 9 418 Settlements – (2) – – (2) – (2) – – (2)Contributions by plan participants 2 5 – – 7 20 3 – – 23 Actuarial gain/(loss) 1,424 (8) – – 1,416 (4,534) (121) – – (4,655)Benefits paid (659) (58) (1) (6) (724) (598) (42) (2) (9) (651)Business disposals – (6) – – (6) – – – – –Exchange and other adjustments (58) 28 – – (30) (52) 213 – – 161

Fair value of plan assets at the end of the year 15,675 1,025 – – 16,700 13,537 959 – – 14,496

The BankFair value of plan assets at beginning of the year 13,537 160 – – 13,697 17,231 141 – – 17,372Expected return on plan assets 904 6 – – 910 1,134 11 – – 1,145Employer contribution 525 24 1 1 551 336 25 1 6 368Settlements – – – – – – – – – –Contributions by plan participants 2 1 – – 3 20 1 – – 21Actuarial gain/(loss) 1,424 (13) – – 1,411 (4,534) (65) – – (4,599)Benefits paid (659) (10) (1) (1) (671) (598) (9) (1) (6) (614)Exchange and other adjustments (58) (33) – – (91) (52) 56 – – 4

Fair value of plan assets atthe end of the year 15,675 135 – – 15,810 13,537 160 – – 13,697



29 Retirement benefit obligations continuedAmounts recognised on balance sheetThe pension and post-retirement benefit assets and liabilities recognised on the balance sheet are as follows:

2009 2008



The GroupBenefit obligation at end of period (19,209) (1,277) (65) (95) (20,646) (14,395) (1,220) (43) (125) (15,783)Fair value of plan assets at end of period 15,675 1,025 – – 16,700 13,537 959 – – 14,496

Net deficit (3,534) (252) (65) (95) (3,946) (858) (261) (43) (125) (1,287)Unrecognised actuarial losses/(gains) 3,087 158 (7) 10 3,248 (167) 150 (11) 23 (5)

Net recognised liability (447) (94) (72) (85) (698) (1,025) (111) (54) (102) (1,292)

Recognised assets – 71 – – 71 – 65 – – 65 Recognised liability (447) (165) (72) (85) (769) (1,025) (176) (54 ) (102) (1,357)

Net recognised liability (447) (94) (72) (85) (698) (1,025) (111) (54 ) (102) (1,292)

The BankBenefit obligation at end of period (19,209) (245) (59) (11) (19,524) (14,395) (269) (54) (17) (14,735)Fair value of plan assets at end of period 15,675 135 – – 15,810 13,537 160 – – 13,697

Net deficit (3,534) (110) (59) (11) (3,714) (858) (109) (54) (17) (1,038)Unrecognised actuarial (gains)/losses 3,087 71 (7) 2 3,153 (167) 66 (10) 9 (102)


Recognised assetsa – 15 – – 15 – 14 – – 14Recognised liability (447) (54) (66) (9) (576) (1,025) (57) (64) (8) (1,154)


The UKRF funded status, as measured using the IAS 19 assumptions detailed below, has decreased from a £0.9bn surplus at 31st December 2009 to adeficit of £3.5bn at 31st December 2009. The most significant reasons for this change were the decrease in AA corporate bond yields which resulted in alower discount rate of 5.61% (31st December 2008: 6.75%) and an increase in the long-term inflation assumption to 3.76% (31st December 2008: 3.16%).The impact of the change in assumptions was partially offset by a one-off curtailment credit resulting from the closure of the UK final salary pensionschemes to existing members, better than expected asset performance, and contributions paid in excess of the pension expense.

Notea Included within other assets.


29 Retirement benefit obligations continuedAssumptionsObligations arising under defined benefit schemes are actuarially valued using the projected unit credit method. Under this method, where a definedbenefit scheme is closed to new members, such as in the case of the 1964 Pension Scheme, the current service cost expressed as a percentage of salaryis expected to increase in the future, although this higher rate will be applied to a decreasing payroll. The latest actuarial IFRS valuations were carried out as at 31st December using the following assumptions:

UK schemes Overseas schemes

2009 2008 2009 2008% p.a. % p.a. % p.a. % p.a.

The GroupDiscount rate 5.61 6.75 7.53 7.09Rate of increase in salaries 4.26 3.66 5.49 5.93Inflation rate 3.76 3.16 3.78 3.98Rate of increase for pensions in payment 3.56 3.06 3.27 3.17Rate of increase for pensions in deferment 3.76 3.16 2.81 4.37Initial health care inflation 7.00 8.00 8.50 9.00Long-term health care inflation 5.00 5.00 5.00 5.01Expected return on plan assets 6.70 6.80 7.44 7.95

The BankDiscount rate 5.61 6.75 5.91 6.10Rate of increase in salaries 4.26 3.66 4.07 4.40Inflation rate 3.76 3.16 2.20 2.60Rate of increase for pensions in payment 3.56 3.06 1.27 1.49Rate of increase for pensions in deferment 3.76 3.16 1.27 2.00Initial health care inflation 7.00 8.00 8.50 8.98Long-term health care inflation 5.00 5.00 5.00 5.15Expected return on plan assets 6.70 6.80 6.11 6.84

The expected return on plan assets assumption is weighted on the basis of the fair value of these assets. Health care inflation assumptions are weighted on the basis of the health care cost for the period. All other assumptions are weighted on the basis of the defined benefit obligation at the end of the period.

The UK Schemes discount rate assumption is based on a liability-weighted rate derived from an AA corporate bond yield curve.

The overseas health care inflation assumptions relate to the US.

Mortality assumptionsThe post-retirement mortality assumptions used in valuing the liabilities of the UKRF were based on the standard 2000 series tables as published by theInstitute and Faculty of Actuaries. These tables are considered to be most relevant to the population of the UKRF based on their mortality history. Thesewere then adjusted in line with the actual experience of the UKRF’s own pensioners relative to the standard table. An allowance has been made for futuremortality improvements based on the medium cohort projections published by the Continuous Mortality Investigation Bureau subject to a floor of 1% pa onfuture improvements. On this basis the post-retirement mortality assumptions for the UKRF includes:

2009 2008 2007 2006 2005

Longevity at 60 for current pensioners (years)– Males 27.5 27.4 26.7 25.8 25.8– Females 28.7 28.5 27.9 29.5 29.5

Longevity at 60 for future pensioners currently aged 40 (years)– Males 29.6 29.5 28.0 27.1 27.1– Females 30.6 30.5 29.1 30.7 30.6



29 Retirement benefit obligations continuedSensitivity analysisSensitivity analysis for each of the principal assumptions used to measure the benefit obligation of the UKRF are as follows:

Impact on UKRF benefit obligation

(Decrease)/ (Decrease)/Increase Increase

% £bn

0.5% increase to:– Discount rate (8.5) (1.6)– Rate of inflation 7.7 1.51 year increase to longevity at 60 2.5 0.5

Following the amendment to the UKRF Trust Deed on 10th September 2009, the UKRF benefit obligation is not sensitive to future salary growth.

Post-retirement health care

A one percentage point change in assumed health care trend rates, assuming all other assumptions remain constant would have the following effects for 2009:

1% increase 1% decrease£m £m

The GroupEffect on total of service and interest cost components 1 (1)Effect on post-retirement benefit obligation 13 (11)

The BankEffect on total of service and interest cost components – –Effect on post-retirement benefit obligation 6 (4)

AssetsA long-term strategy has been set for the asset allocation of the UKRF which comprises a mixture of equities, bonds, property and other appropriate assets.This recognises that different asset classes are likely to produce different long-term returns and some asset classes may be more volatile than others.

The long-term strategy ensures that investments are adequately diversified. Asset managers are permitted some flexibility to vary the asset allocation fromthe long-term strategy within control ranges agreed with the trustee from time to time.

The UKRF also employs derivative instruments, where appropriate, to achieve a desired exposure or return, or to match assets more closely to liabilities. Thevalue of assets shown reflects the actual physical assets held by the scheme, with any derivative holdings reflected on a mark to market basis. The expectedreturn on asset assumptions overall have been based on the portfolio of assets created after allowing for the net impact of the derivatives on the risk andreturn profile of the holdings.

During the second half of 2009, an investment de-risking programme was agreed for the UKRF between the Bank and the Trustee in order to achieve abetter matching between assets and liabilities and to reduce the investment risk profile of the plan. This involved a partial sale of physical equities andpurchase of index-linked gilts.


29 Retirement benefit obligations continuedThe value of the assets of the schemes, their percentage in relation to total scheme assets, and their expected rate of return at 31st December 2009 and31st December 2008 were as follows:

The Group UK schemes Overseas schemes Total

% of Expected % of Expected % of Expectedtotal fair rate total fair rate total fair ratevalue of of value of of value of of

Value scheme return Value scheme return Value scheme return£m assets % £m assets % £m assets %

2009Equities 4,236 27 8.6 400 39 7.8 4,636 28 8.5Bonds 8,787 56 4.9 387 38 6.0 9,174 55 4.9Property 1,186 8 7.0 20 2 12.6 1,206 7 7.1Derivatives (37) – – – – – (37) – –Cash 1,157 7 0.5 139 14 3.2 1,296 8 0.8Other 346 2 5.0 79 7 8.1 425 2 5.6

Fair value of plan assetsa 15,675 100 6.7 1,025 100 6.6 16,700 100 6.7

2008Equities 5,813 43 8.5 217 23 9.3 6,030 42 8.5 Bonds 6,360 47 5.3 166 17 6.2 6,526 45 5.3 Property 1,214 9 7.2 16 2 13.4 1,230 8 7.3 Derivatives (420) (3) – – – – (420) (3) –Cash (131) (1) 2.0 415 43 7.6 284 2 3.9Other 701 5 7.4 145 15 6.4 846 6 7.2

Fair value of plan assetsa 13,537 100 6.8 959 100 8.0 14,496 100 6.9

The Bank UK schemes Overseas schemes Total

% of Expected % of Expected % of Expectedtotal fair rate total fair rate total fair ratevalue of of value of of value of of

Value scheme return Value scheme return Value scheme return£m assets % £m assets % £m assets %

2009Equities 4,236 27 8.6 48 36 6.9 4,284 27 8.6Bonds 8,787 56 4.9 59 44 5.0 8,846 56 4.9Property 1,186 8 7.0 – – 3.1 1,186 8 7.0Derivatives (37) – – – – – (37) – –Cash 1,157 7 0.5 15 11 3.2 1,172 7 0.5Other 346 2 5.0 13 9 10.0 359 2 5.2

Fair value of plan assets a 15,675 100 6.7 135 100 5.9 15,810 100 6.7

2008Equities 5,813 43 8.5 61 38 7.6 5,874 43 8.5Bonds 6,360 47 5.3 62 39 5.2 6,422 47 5.3Property 1,214 9 7.2 3 2 10.7 1,217 9 7.2Derivatives (420) (3) – – – – (420) (3) –Cash (131) (1) 2.0 26 16 3.5 (105) (1) 1.6Other 701 5 7.4 8 5 9.8 709 5 7.4

Fair value of plan assets a 13,537 100 6.8 160 100 6.8 13,697 100 6.7

Notea Excludes £890m (2008: £675m) representing the money purchase assets of the UKRF.



29 Retirement benefit obligations continuedThe UKRF plan assets include £58m relating to UK private equity investments (2008: £27m) and £921m relating to overseas private equity investments(2008: £735m). These are disclosed within Equities.

Amounts included in the Group fair value of plan assets include £4m (2008: £5m) relating to shares in Barclays Group, £5m (2008: £11m) relating to bondsissued by the Barclays Group, £nil (2008: £nil) relating to other investments in the Barclays Group, and £10m (2008: £17m) relating to property occupied byGroup companies.

Amounts included in the Bank fair value of plan assets include £1m (2008: £1m) relating to property occupied by Bank companies.

The expected return on assets is determined by calculating a total return estimate based on weighted average estimated returns for each asset class. Assetclass returns are estimated using current and projected economic and market factors such as inflation, credit spreads and equity risk premiums.

The Group actual return on plan assets was an increase of £2,351m (2008: £3,480m decrease). The Bank actual return on plan assets was an increase of£2,321m (2008: £3,454m decrease).

Actuarial gains and lossesThe actuarial gains and losses arising on plan liabilities and plan assets are as follows:

2009 2008 2007 2006 2005£m £m £m £m £m

The GroupUK schemesPresent value of obligations (19,274) (14,438) (16,623) (17,353) (18,252)Fair value of plan assets 15,675 13,537 17,231 16,761 15,571

Net (deficit)/surplus in the plans (3,599) (901) 608 (592) (2,681)Experience gains and (losses) on plan liabilities– amount 107 (81) (297) 48 (2)– as percentage of plan liabilities 1% (1%) (2%) – –

Difference between actual and expected return on plan assets– amount 1,424 (4,534) (332) 423 1,599– as percentage of plan assets 9% (33%) (2%) 3% 10%

Overseas schemesPresent value of obligations (1,372) (1,345) (1,011) (970) (1,017)Fair value of plan assets 1,025 959 796 745 819

Net deficit in the plans (347) (386) (215) (225) (198)Experience losses on plan liabilities– amount (45) (96) (79) (54) (2)– as percentage of plan liabilities (3%) (7%) (8%) (6%) –

Difference between actual and expected return on plan assets– amount (8) (121) (11) 25 2– as percentage of plan assets (1%) (13%) – 3% –

Total UK and Overseas schemesPresent value of obligations (20,646) (15,783) (17,634) (18,323) (19,269)Fair value of plan assets 16,700 14,496 18,027 17,506 16,390

Net (deficit)/surplus in the plans (3,946) (1,287) 393 (817) (2,879)Experience gains and (losses) on plan liabilities– amount 62 (177) (376) (6) (4)– as percentage of plan liabilities 0% (1%) (2%) – –



29 Retirement benefit obligations continued

2009 2008 2007 2006 2005£m £m £m £m £m

The BankUK schemesPresent value of obligations (19,268) (14,449) (16,638) (17,000) (17,865)Fair value of plan assets 15,675 13,537 17,231 16,460 15,305

Net (deficit)/surplus in the plans (3,593) (912) 593 (540) (2,560)Experience gains and (losses) on plan liabilities– amount 107 (81) (299) 47 (2)– as percentage of plan liabilities 1% (1%) (2%) – –


Overseas schemesPresent value of obligations (256) (286) (213) (209) (223)Fair value of plan assets 135 160 141 135 122

Net deficit in the plans (121) (126) (72) (74) (101)Experience losses on plan liabilities– amount (5) (96) (9) (15) (9)– as percentage of plan liabilities (2%) (34%) (4%) (7%) (4%)

Difference between actual and expected return on plan assets– amount (13) (65) (2) 4 3– as percentage of plan assets (10%) (41%) (1%) 3% 2%

Total UK and Overseas schemesPresent value of obligations (19,524) (14,735) (16,851) (17,209) (18,088)Fair value of plan assets 15,810 13,697 17,372 16,595 15,427

Net (deficit)/surplus in the plans (3,714) (1,038) 521 (614) (2,661)Experience gains and (losses) on plan liabilities– amount 102 (177) (308) 32 (11)– as percentage of plan liabilities 1% (1%) (2%) – –




29 Retirement benefit obligations continuedFundingThe most recent triennial funding valuation of the UK Retirement Fund (UKRF) was performed with an effective date of 30th September 2007. In compliancewith the Pensions Act 2004, the Bank and Trustee have agreed a scheme specific funding target, statement of funding principles, and a schedule ofcontributions. This agreement forms the basis of the Group’s commitment that the fund has sufficient assets to make payments to members in respect of their accrued benefits as and when they fall due. This funding valuation uses a discount rate that reflects a prudent expectation of long-term futureinvestment returns from the current and assumed future investment strategy, and takes into account projected future salary increases when assessingliabilities arising from accrued service.

As at 30th September 2007 the funding valuation showed a surplus of £0.2bn. The Scheme Actuary prepares an annual update of the funding position as at 30th September. The latest annual update was carried out as at 30th September 2009 and showed a deficit of £4.8bn. The next triennial fundingvaluation will take place with an effective date of 30th September 2010.

The Group has agreed funding contributions which, in aggregate, are no less than those which are sufficient to meet the Group’s share of the cost ofbenefits accruing over each year. The Group has, in the recent past, chosen to make funding contributions in excess of this, more consistent with the IAS 19 service cost; and in 2009 made an additional voluntary contribution of £150m.

Defined benefit contributions paid with respect to the UKRF were as follows:

£m

Contributions paid2009 5252008 3362007 355

Excluding the UKRF, the Group is expected to pay contributions of approximately £1m to UK schemes and £59m to overseas schemes in 2010.

Excluding the UKRF, the Bank is expected to pay contributions of approximately £1m to UK schemes and £10m to overseas schemes in 2010.

The Group is committed to making estimated contributions to UKRF in 2010 of £290m, with potential additional voluntary contributions dependent on the scheme’s funding level.

30 Called up share capitalOrdinary SharesThe authorised ordinary share capital of the Bank, as at 31st December 2009, was 3,000 million ordinary shares of £1 each (2008: 3,000 million).

During the year, the Bank issued 4 million ordinary shares, for cash consideration of £25m.

Preference SharesThe authorised preference share capital of Barclays Bank PLC, as at 31st December 2009, was 1,000 Preference Shares of £1 each (2008: 1,000); 400,000Preference Shares of ¤100 each (2008: 400,000); 400,000 Preference Shares of £100 each (2008: 400,000); 400,000 Preference Shares of US$100 each(2008: 400,000); 300 million Preference Shares of US$0.25 each (2008: 300 million).

The issued preference share capital of Barclays Bank PLC, as at 31st December 2009, comprised 1,000 Sterling Preference Shares of £1 each (2008: 1,000);240,000 Euro Preference Shares of ¤100 each (2008: 240,000); 75,000 Sterling Preference Shares of £100 each (2008: 75,000); 100,000 US DollarPreference Shares of US$100 each (2008: 100,000); 237 million US Dollar Preference Shares of US$0.25 each (2008: 237 million).

2009 2008£m £m

Called up share capital, allotted and fully paidAt beginning of year 2,338 2,336Issued for cash 4 2

At end of year 2,342 2,338

Called up preference share capital, allotted and fully paidAt beginning of year 60 46Issued for cash – 14

At end of year 60 60

Called up share capital 2,402 2,398

Share premium 2009 2008£m £m

At beginning of year 12,060 10,751Ordinary shares issued for cash 21 15Preference shares issued for cash – 1,294Preference shares – other movement 11 –

At end of year 12,092 12,060


30 Called up share capital continuedSterling £1 Preference Shares1,000 Sterling cumulative callable preference shares of £1 each (the ‘£1 Preference Shares’) were issued on 31st December 2004 at nil premium.

The £1 Preference Shares entitle the holders thereof to receive Sterling cumulative cash dividends out of distributable profits of Barclays Bank PLC, semi-annually at a rate reset semi-annually equal to the Sterling interbank offered rate for six-month sterling deposits.

Barclays Bank PLC shall be obliged to pay such dividends if: (1) it has profits available for the purpose of distribution under the Companies Act 2006 as ateach dividend payment date; and (2) it is solvent on the relevant dividend payment date, provided that a capital regulations condition is satisfied on suchdividend payment date. The dividends shall not be due and payable on the relevant dividend payment date except to the extent that Barclays Bank PLCcould make such payment and still be solvent immediately thereafter. Barclays Bank PLC shall be considered solvent on any date if: (1) it is able to pay itsdebts to senior creditors as they fall due; and (2) its auditors have reported within the previous six months that its assets exceed its liabilities. If Barclays BankPLC shall not pay, or shall pay only in part, a dividend for a period of seven days or more after the due date for payment, the holders of the £1 PreferenceShares may institute proceedings for the winding-up of Barclays Bank PLC. No remedy against Barclays Bank PLC shall be available to the holder of any £1Preference Shares for the recovery of amounts owing in respect of £1 Preference Shares other than the institution of proceedings for the winding-up ofBarclays Bank PLC and/or proving in such winding-up. On a winding-up or other return of capital (other than a redemption or purchase by Barclays BankPLC of any of its issued shares, or a reduction of share capital, permitted by the Articles of Barclays Bank PLC and under applicable law), the assets ofBarclays Bank PLC available to shareholders shall be applied in priority to any payment to the holders of ordinary shares and any other class of shares in thecapital of Barclays Bank PLC then in issue ranking junior to the £1 Preference Shares on such a return of capital and pari passu on such a return of capitalwith the holders of any other class of shares in the capital of Barclays Bank PLC then in issue (other than any class of shares in the capital of Barclays BankPLC then in issue ranking in priority to the £1 Preference Shares on a winding-up or other such return of capital), in payment to the holders of the £1Preference Shares of a sum equal to the aggregate of: (1) an amount equal to the dividends accrued thereon for the then current dividend period (and anyaccumulated arrears thereof) to the date of the commencement of the winding-up or other such return of capital; and (2) an amount equal to £1 per £1Preference Share. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of the £1 Preference Shares willhave no right or claim to any of the remaining assets of Barclays Bank PLC and will not be entitled to any further participation in such return of capital. The £1Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, subject to the Companies Act 2006 and its Articles.Holders of the £1 Preference Shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank PLC.

Euro Preference Shares100,000 Euro 4.875% non-cumulative callable preference shares of ¤100 each (the ‘4.875% Preference Shares’) were issued on 8th December 2004 for aconsideration of ¤993.6m (£688.4m), of which the nominal value was ¤10m and the balance was share premium. The 4.875% Preference Shares entitlethe holders thereof to receive Euro non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of 4.875% perannum on the amount of ¤10,000 per preference share until 15th December 2014, and thereafter quarterly at a rate reset quarterly equal to 1.05% perannum above the Euro interbank offered rate for three-month Euro deposits.

The 4.875% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th December 2014, and on eachdividend payment date thereafter at ¤10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

140,000 Euro 4.75% non-cumulative callable preference shares of ¤100 each (the ‘4.75% Preference Shares’) were issued on 15th March 2005 for aconsideration of ¤1,383.3m (£966.7m), of which the nominal value was ¤14m and the balance was share premium. The 4.75% Preference Shares entitlethe holders thereof to receive Euro non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of 4.75% perannum on the amount of ¤10,000 per preference share until 15th March 2020, and thereafter quarterly at a rate reset quarterly equal to 0.71% per annumabove the Euro interbank offered rate for three-month Euro deposits.

The 4.75% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th March 2020, and on each dividendpayment date thereafter at ¤10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

Sterling Preference Shares75,000 Sterling 6.0% non-cumulative callable preference shares of £100 each (the ‘6.0% Preference Shares’) were issued on 22nd June 2005 for aconsideration of £743.7m, of which the nominal value was £7.5m and the balance was share premium. The 6.0% Preference Shares entitle the holdersthereof to receive Sterling non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of 6.0% per annum on theamount of £10,000 per preference share until 15th December 2017, and thereafter quarterly at a rate reset quarterly equal to 1.42% per annum above theLondon interbank offered rate for three-month Sterling deposits.

The 6.0% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th December 2017, and on eachdividend payment date thereafter at £10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

US Dollar Preference Shares100,000 US Dollar 6.278% non-cumulative callable preference shares of US$100 each (the ‘6.278% Preference Shares’), represented by 100,000 AmericanDepositary Shares, Series 1, were issued on 8th June 2005 for a consideration of US$995.4m (£548.1m), of which the nominal value was US$10m and thebalance was share premium. The 6.278% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out ofdistributable profits of Barclays Bank PLC, semi-annually at a fixed rate of 6.278% per annum on the amount of US$10,000 per preference share until 15thDecember 2034, and thereafter quarterly at a rate reset quarterly equal to 1.55% per annum above the London interbank offered rate for three-month USDollar deposits.

The 6.278% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th December 2034, and on eachdividend payment date thereafter at US$10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

30 million US Dollar 6.625% non-cumulative callable preference shares of US$0.25 each (the ‘6.625% Preference Shares’), represented by 30 millionAmerican Depositary Shares, Series 2, were issued on 25th and 28th April 2006 for a consideration of US$727m (£406m), of which the nominal value wasUS$7.5m and the balance was share premium. The 6.625% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cashdividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 6.625% per annum on the amount of US$25 per preference share.



30 Called up share capital continuedThe 6.625% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th September 2011, and on eachdividend payment date thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

55 million US Dollar 7.1% non-cumulative callable preference shares of US$0.25 each (the ‘7.1% Preference Shares’), represented by 55 million AmericanDepositary Shares, Series 3, were issued on 13th September 2007 for a consideration of US$1,335m (£657m), of which the nominal value was US$13.75mand the balance was share premium. The 7.1% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out ofdistributable profits of Barclays Bank PLC, quarterly at a fixed rate of 7.1% per annum on the amount of US$25 per preference share.

The 7.1% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole or in part, on 15th December 2012, and on each dividendpayment date thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

46 million US Dollar 7.75% non-cumulative callable preference shares of US$0.25 each (the ‘7.75% Preference Shares’), represented by 46 millionAmerican Depositary Shares, Series 4, were issued on 7th December 2007 for a consideration of US$1,116m (£550m), of which the nominal value wasUS$11.5m and the balance was share premium. The 7.75% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cashdividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 7.75% per annum on the amount of US$25 per preference share.

The 7.75% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole or in part, on 15th December 2013, and on each dividendpayment date thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

106 million US Dollar 8.125% non-cumulative callable preference shares of US$0.25 each (the ‘8.125% Preference Shares’), represented by 106 millionAmerican Depositary Shares, Series 5, were issued on 11th April 2008 and 25th April 2008 for a total consideration of US$2,650m (£1,345m), of which thenominal value was US$26.5m and the balance was share premium. The 8.125% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 8.125% per annum on the amount of US$25 perpreference share.

The 8.125% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole or in part, on 15th June 2013, and on each dividend paymentdate thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

No redemption or purchase of any 4.875% Preference Shares, the 4.75% Preference Shares, the 6.0% Preference Shares, the 6.278% Preference Shares,the 6.625% Preference Shares, the 7.1% Preference Shares, the 7.75% Preference Shares and the 8.125% Preference Shares (together, the ‘PreferenceShares’) may be made by Barclays Bank PLC without the prior notification to the UK FSA and any such redemption will be subject to the Companies Act2006 and the Articles of Barclays Bank PLC.

On a winding-up of Barclays Bank PLC or other return of capital (other than a redemption or purchase of shares of Barclays Bank PLC, or a reduction of sharecapital), a holder of Preference Shares will rank in the application of assets of Barclays Bank PLC available to shareholders: (1) junior to the holder of anyshares of Barclays Bank PLC in issue ranking in priority to the Preference Shares; (2) equally in all respects with holders of other preference shares and anyother shares of Barclays Bank PLC in issue ranking pari passu with the Preference Shares; and (3) in priority to the holders of ordinary shares and any othershares of Barclays Bank PLC in issue ranking junior to the Preference Shares.

The holders of the £400m 6% Callable Perpetual Core Tier One Notes and the US$1,000m 6.86% Callable Perpetual Core Tier One Notes of Barclays BankPLC (together, the ‘TONs’) and the holders of the US$1,250m 8.55% Step-up Callable Perpetual Reserve Capital Instruments, the US$750m 7.375% Step-up Callable Perpetual Reserve Capital Instruments, the ¤850m 7.50% Step-up Callable Perpetual Reserve Capital Instruments, the £500m 5.3304% Step-up Callable Perpetual Reserve Capital Instruments, the US$1,350m 5.926% Step-up Callable Perpetual Reserve Capital Instruments, the £500m 6.3688%Step-up Callable Perpetual Reserve Capital Instruments, the US$1,250m 7.434% Step-up Callable Perpetual Reserve Capital Instruments and the £3,000m14% Step-up Callable Perpetual Reserve Capital Instruments of Barclays Bank PLC (together, the ‘RCIs’) would, for the purposes only of calculating theamounts payable in respect of such securities on a winding-up of Barclays Bank PLC, subject to limited exceptions and to the extent that the TONs and theRCIs are then in issue, rank pari passu with the holders of the most senior class or classes of preference shares then in issue in the capital of Barclays BankPLC. Accordingly, the holders of the preference shares would rank equally with the holders of such TONs and RCIs on such a winding-up of Barclays BankPLC (unless one or more classes of shares of Barclays Bank PLC ranking in priority to the preference shares are in issue at the time of such winding-up, inwhich event the holders of such TONs and RCIs would rank equally with the holders of such shares and in priority to the holders of the preference shares).

Subject to such ranking, in such event, holders of the preference shares will be entitled to receive out of assets of Barclays Bank PLC available fordistributions to shareholders, liquidating distributions in the amount of ¤10,000 per 4.875% Preference Share, ¤10,000 per 4.75% Preference Share,£10,000 per 6.0% Preference Share, US$10,000 per 6.278% Preference Share, US$25 per 6.625% Preference Share, US$25 per 7.1% Preference Share,US$25 per 7.75% Preference Share and US$0.25 per 8.125% Preference Share, plus, in each case, an amount equal to the accrued dividend for the thencurrent dividend period to the date of the commencement of the winding-up or other such return of capital. If a dividend is not paid in full on any preferenceshares on any dividend payment date, then a dividend restriction shall apply.

This dividend restriction will mean that neither Barclays Bank PLC nor Barclays PLC may (a) declare or pay a dividend (other than payment by Barclays PLC of a final dividend declared by its shareholders prior to the relevant dividend payment date, or a dividend paid by Barclays Bank PLC to Barclays PLC or to awholly owned subsidiary) on any of their respective ordinary shares, other preference shares or other share capital or (b) redeem, purchase, reduce orotherwise acquire any of their respective share capital, other than shares of Barclays Bank PLC held by Barclays PLC or a wholly owned subsidiary, until theearlier of: (1) the date on which Barclays Bank PLC next declares and pays in full a preference dividend; and (2) the date on or by which all the preferenceshares are redeemed in full or purchased by Barclays Bank PLC.

Holders of the preference shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank PLC. Barclays Bank PLC isnot permitted to create a class of shares ranking as regards participation in the profits or assets of Barclays Bank PLC in priority to the preference shares, savewith the sanction of a special resolution of a separate general meeting of the holders of the preference shares (requiring a majority of not less than three-fourths of the holders of the preference shares voting at the separate general meeting) or with the consent in writing of the holders of three-fourths of thepreference shares.

Except as described above, the holders of the preference shares have no right to participate in the surplus assets of Barclays Bank PLC.


31 ReservesOther reserves

Available Cash flowfor sale hedging Translationreserve reserve reserve Total

£m £m £m £m

The GroupAt 1st January 2009 (1,249) 132 2,840 1,723Net gains from changes in fair value 1,506 287 – 1,793Net gains transferred to net profit (642) (92) – (734)Currency translation differences – – (1,223) (1,223)Net losses transferred to net profit due to impairment 670 – – 670Changes in insurance liabilities (67) – – (67)Net gains transferred to net profit due to fair value hedging (123) – – (123)Tax (179) (75) (2) (256)

At 31st December 2009 (84) 252 1,615 1,783

The BankAt 1st January 2009 (233) 312 292 371Net gains from changes in fair value 330 108 – 438Net gains transferred to net profit (312) (241) – (553)Currency translation differences – – (601) (601)Net losses transferred to net profit due to impairment 351 – – 351Tax (142) 30 – (112)

At 31st December 2009 (6) 209 (309) (106)

Available Cash flowfor sale hedging Translationreserve reserve reserve Total

£m £m £m £m

The GroupAt 1st January 2008 111 26 (307) (170)Net (losses)/gains from changes in fair value (1,752) 252 – (1,500)Net (gains)/losses transferred to net profit (212) 19 – (193)Currency translation differences – – 2,307 2,307Net losses transferred to net profit due to impairment 382 – – 382Changes in insurance liabilities 17 – – 17Net gains transferred to net profit due to fair value hedging (2) – – (2)Tax 207 (165) 840 882

At 31st December 2008 (1,249) 132 2,840 1,723

The BankAt 1st January 2008 121 (18) 125 228Net (losses)/gains from changes in fair value (590) 489 – (101)Net (gains)/losses transferred to net profit (146) 63 – (83)Currency translation differences – – 142 142Net losses transferred to net profit due to impairment 219 – – 219Tax 163 (222) 25 (34)

At 31st December 2008 (233) 312 292 371

Available for sale net gains transferred to net profit includes £576m gain (2008: £212m gain) relating to continuing operations and £66m gain (2008: nil)relating to discontinued operations.

The available for sale reserve represents the unrealised change in the fair value of available for sale investments since initial recognition.

The cash flow hedging reserve represents the cumulative gains and losses on effective cash flow hedging instruments that will be recycled to the incomestatement when the hedged transaction affects profit or loss.

The currency translation reserve represents the cumulative gains and losses on the retranslation of the Group’s and the Bank’s net investment in foreignoperations, net of the effects of hedging.



31 Reserves continuedTransfers from cash flow hedging reserveTransfers from the cash flow hedging reserve to the income statement were: Interest income: £22m loss (2008: £4m loss), interest expense: £272m gain (2008: £74m loss), net trading income: £165m loss (2008: £119m gain), administrative and general expenses: £7m gain (2008: £60m loss), and for the Bank, interest income: £nil (2008: £2m gain), interest expense: £245m gain (2008: £nil), net trading income: £11m loss (2008: £5m loss) andadministrative and general expenses: £7m gain (2008: £60m loss).

Retained earnings The Group The BankRetained Retainedearnings earnings

£m £m

At 1st January 2009 22,457 16,422Profit attributable to equity holders 9,993 10,219Equity-settled share schemes 298 98Tax on equity-settled shares schemes 156 7Other taxes 32 2Capital injection from Barclays PLC 4,850 4,850Vesting of Barclays PLC shares under share-based payment schemes (80) (59)Dividends paid (103) (103)Dividends on Preference Shares and other shareholders’ equity (599) (599)Other 85 (17)

At 31st December 2009 37,089 30,820

At 1st January 2008 14,222 6,805Profit attributable to equity holders 4,846 6,157Equity-settled share schemes 463 51Tax on equity-settled shares schemes (4) 2Other taxes (52) (1)Capital injection from Barclays PLC 5,137 5,137Vesting of Barclays PLC shares under share-based payment schemes (437) (93)Dividends paid (1,160) (1,160)Dividends on Preference Shares and other shareholders’ equity (502) (502)Other (56) 26

At 31st December 2008 22,457 16,422

The Group operates in a number of countries subject to regulations under which subsidiaries and other operations have to maintain minimum levels of capital.The current policy of the Group is that the local capital requirements are met, to the greatest possible extent, through the retention of profit. Certain countriesalso operate exchange control regulations which limit the amount of dividends that can be remitted to non-resident shareholders.


32 Other shareholders’ equity

The Group The Bank£m £m

At 1st January 2009 2,564 2,628Appropriations – –Tax credits 47 47Other movements (52) (52)

At 31st December 2009 2,559 2,623

At 1st January 2008 2,687 2,751Appropriations 23 23Tax credits 44 44Other movements (190) (190)

At 31st December 2008 2,564 2,628

Included in other shareholders’ equity are:

Issuances of reserve capital instruments which bear a fixed rate of interest ranging between 7.375%-8.55% until 2010 or 2011. After these dates, in theevent that the reserve capital instruments are not redeemed, they will bear interest at rates fixed periodically in advance, based on London or Europeaninterbank rates. These instruments are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June or December 2010or 2011. The Bank may elect to defer any payment of interest on the reserve capital instruments for any period of time. Whilst such deferral is continuing,neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of its ordinary shares or preference shares.

Issuance of capital notes which bear interest at rates fixed periodically in advance, based on London interbank rates. These notes are repayable in each case,at the option of the Bank, in whole on any interest payment date. The Bank is not obliged to make a payment of interest on its capital notes if, in thepreceding six months, a dividend has not been declared or paid on any class of shares of Barclays PLC.

33 Non-controlling interests


At beginning of year 2,372 1,949Share of profit after tax 296 403Dividend and other payments (132) (134)Equity issued by subsidiaries – 4Available for sale reserve: net (loss)/gain from changes in fair value (12) (1)Cash flow hedges: net gain/(loss) from changes in fair value (19) 76Currency translation differences 285 59Additions 9 –Disposals (91) (11)Other 66 27

At end of year 2,774 2,372

The non-controlling interests at 31st December represented £2,539m holdings in Absa Group Limited (2008: £1,994m) and £235m other holdings(2008: £378m).



34 Contingent liabilities and commitmentsContingent liabilities and commitmentsThe following tables summarise the nominal principal amount of contingent liabilities and commitments with off-balance sheet risk:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Acceptances and endorsements 375 585 350 546 Guarantees and letters of credit pledged as collateral security 15,406 15,652 13,150 13,325 Securities lending arrangements 27,406 38,290 27,406 38,290 Other contingent liabilities 9,587 11,783 7,402 8,869

Contingent liabilities 52,774 66,310 48,308 61,030

Documentary credits and other short-term trade related transactions 762 859 535 571 Undrawn note issuance and revolving underwriting facilities:Forward asset purchases and forward deposits placed 46 291 36 36 Standby facilities, credit lines and other 206,467 259,666 159,245 188,474

Commitments 207,275 260,816 159,816 189,081

Nature of instrumentsIn common with other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these facilities areoffset by corresponding obligations of third parties.

An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be presented, butreimbursement by the customer is normally immediate. Endorsements are residual liabilities of the Group in respect of bills of exchange, which have beenpaid and subsequently rediscounted.

Guarantees and letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below theirnominal amounts.

Until the disposal of BGI on 1st December 2009, the Group facilitated securities lending arrangements for its managed investment funds wherebysecurities held by funds under management were lent to third parties. Borrowers provided cash or investment grade assets as collateral equal to 100% ofthe market value of the securities lent plus a margin of 2% –10%. The Group has agreed with BlackRock, Inc to continue to provide indemnities to supportthese arrangements for a further three years. As at 31st December 2009, the value of the collateral held was £28,248m (2008: £39,690m) and that of thestock lent was £27,406m (2008: £38,290m).

Other contingent liabilities include transaction related customs and performance bonds and are, generally, short-term commitments to third parties whichare not directly dependent on the customer’s creditworthiness.

Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a fixedperiod, or have no specific maturity but are cancellable by the lender subject to notice requirements.

Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.


34 Contingent liabilities and commitments continuedCapital commitmentsAt 31st December 2009 the Group commitments for capital expenditure under contract amounted to £129m (2008: £48m). At 31st December 2009 theBank commitments for capital expenditure under contract amounted to £129m (2008: £48m).

Assets pledgedAssets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security depositsrelating to derivatives. The disclosure includes any asset transfers associated with liabilities under repurchase agreements and securities lending transactions.

The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Trading portfolio assets 96,176 81,186 53,208 42,327Loans and advances 48,846 28,789 50,628 23,893Available for sale investments 24,264 32,321 17,452 27,255Other 77 3,812 10 –

Assets pledged 169,363 146,108 121,298 93,475

Collateral held as security for assetsUnder certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Group is allowed to resell or repledge thecollateral held. The fair value at the balance sheet date of collateral accepted and repledged to others was as follows:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Fair value of securities accepted as collateral 357,159 424,819 339,995 369,171Of which fair value of securities repledged/transferred to others 283,334 374,222 275,387 290,937



35 Legal proceedingsOn 25th November 2009, the UK Supreme Court decided the test case relating to current account overdraft charges in favour of the banks. The Office ofFair Trading subsequently confirmed that it will not proceed with its investigation into the fairness of these charges following the Supreme Court judgment.Accordingly, we are seeking to have all outstanding claims which were premised on the same legal principles as those at issue in the test case discontinuedor dismissed. There remain a small number of residual complaints challenging the charges on a different basis, but these complaints are not expected tohave a material effect on Barclays.

Barclays Bank PLC, Barclays PLC and various current and former members of Barclays PLC’s Board of Directors have been named as defendants in fiveproposed securities class actions (which have been consolidated) pending in the United States District Court for the Southern District of New York. Theconsolidated amended complaint, dated 12th February 2010, alleges that the registration statements relating to American Depositary Shares representingPreferred Stock, Series 2, 3, 4 and 5 (ADS) offered by Barclays Bank PLC at various times between 2006 and 2008 contained misstatements and omissionsconcerning (amongst other things) Barclays portfolio of mortgage-related (including US subprime-related) securities. Barclays exposure to mortgage andcredit market risk and Barclays financial condition. The consolidated amended complaint asserts claims under Sections 11, 12(a)(2) and 15 of theSecurities Act of 1933. Barclays considers that these ADS-related claims against it are without merit and is defending them vigorously. It is not possible toestimate any possible loss in relation to these claims or any effect that they might have upon operating results in any particular financial period.

On 15th September 2009 motions were filed in the United States Bankruptcy Court for the Southern District of New York by Lehman Brothers Holdings Inc.(LBHI), the SIPA Trustee for Lehman Brothers Inc. (the Trustee) and the Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc. (theCommittee). All three motions challenge certain aspects of the transaction pursuant to which Barclays Capital Inc. (BCI) and other companies in theBarclays Group acquired most of the assets of Lehman Brothers Inc. (LBI) in September 2008 and the court order approving such sale. The claimants seekan order: voiding the transfer of certain assets to BCI; requiring BCI to return to the LBI estate alleged excess value BCI received; and declaring that BCI is notentitled to certain assets that it claims pursuant to the sale documents and order approving the sale. On 16th November 2009, LBHI, the Trustee and theCommittee filed separate complaints in the Bankruptcy Court asserting claims against BCI based on the same underlying allegations as the pendingmotions and seeking relief similar to that which is requested in the motions. On 29th January 2010, BCI filed its response to the motions. Barclays considersthat the motions and claims against BCI are without merit and BCI is vigorously defending its position. On 29th January 2010, BCI also filed a motionseeking delivery of certain assets that LBHI and LBI have failed to deliver as required by the sale documents and the court order approving the sale. It is notpossible to estimate any possible loss to Barclays in relation to these matters or any effect that these matters might have upon operating results in anyparticular financial period.

Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States,involving claims by and against it which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the proceedingsto which Barclays is party to have a significant adverse effect on the financial position of the Group and Barclays has not disclosed the contingent liabilitiesassociated with these claims either because they cannot reasonably be estimated or because such disclosure could be prejudicial to the conduct of theclaims.


36 Competition and regulatory mattersThe scale of regulatory change remains challenging and the global financial crisis is resulting in a significant tightening of regulation and changes toregulatory structures globally, especially for banks that are deemed to be of systemic importance. Concurrently, there is continuing political and regulatoryscrutiny of the operation of the banking and consumer credit industries in the UK and elsewhere which, in some cases, is leading to increased regulation. Forexample, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 in the US will restrict many credit card pricing and marketing practices.The nature and impact of future changes in the legal framework, policies and regulatory action cannot currently be fully predicted and are beyond Barclayscontrol, but, especially in the area of banking regulation, are likely to have an impact on Barclays businesses and earnings.

The market for payment protection insurance (PPI) has been under scrutiny by the UK competition authorities and financial services regulators. Following areference from the Office of Fair Trading (OFT), the UK Competition Commission (CC) undertook an in depth enquiry into the PPI market. The CC publishedits final report on 29th January 2009 concluding that the businesses which offer PPI alongside credit face little or no competition when selling PPI to theircredit customers. In March 2009, Barclays submitted a targeted appeal focused on the prohibition on sale of PPI at the point of sale (POSP) remedy on thebasis that it was not based on sound analysis, and is unduly draconian. The Competition Appeals Tribunal (CAT) upheld Barclays appeal on two grounds,meaning that the CC will be required to reconsider the POSP remedy and the basis for it, and made an order to that effect on 26th November 2009. Thisremittal process is expected to take until the autumn of 2010, at which time the CC will publish its final Remedies Order.

Separately, in 2006, the FSA published the outcome of its broad industry thematic review of PPI sales practices in which it concluded that some firms fail totreat customers fairly and that the FSA would strengthen its actions against such firms. Tackling poor PPI sales practices remains a priority for the FSA. InSeptember 2009, the FSA issued a Consultation Paper on the assessment and redress of PPI complaints made on or after 14th January 2005. The FSA hasannounced that it intends to publish a final version of the policy statement in early 2010 and will amend the DISP (Dispute Resolution: Complaints) rules inthe FSA Sourcebook. Barclays voluntarily complied with the FSA’s request to cease selling single premium PPI by the end of January 2009.

The OFT has carried out investigations into Visa and MasterCard credit card interchange rates. A decision by the OFT in the MasterCard interchange casewas set aside by the CAT in 2006. The OFT is progressing its investigations in the Visa interchange case and a second MasterCard interchange case inparallel and both are ongoing. The outcome is not known but these investigations may have an impact on the consumer credit industry in general andtherefore on Barclays business in this sector. In 2007, the OFT expanded its investigations into interchange rates to include debit cards.

Notwithstanding the Supreme Court ruling in relation to the test case (see Note 35 on page 85) Barclays continues to be involved in the OFT’s work onpersonal current accounts. The OFT initiated a market study into personal current accounts (PCAs) in the UK in 2007 which also included an examination ofother retail banking products, in particular savings accounts, credit cards, personal loans and mortgages in order to take into account the competitivedynamics of UK retail banking. In 2008, the OFT published its market study report, in which it concluded that certain features of the UK PCA market werenot working well for consumers. The OFT reached the provisional view that some form of regulatory intervention is necessary in the UK PCA market. TheOFT also held a consultation to seek views on the findings and possible measures to address the issues raised in its report. In October 2009, the OFTpublished a follow-up report containing details of voluntary initiatives in relation to transparency and switching agreed between the OFT and the industry. A further follow up report is expected in March 2010 to provide details of voluntary initiatives agreed in relation to charging structures. Barclays hasparticipated fully in the market study process and will continue to do so.

US laws and regulations require compliance with US economic sanctions, administered by the Office of Foreign Assets Control, against designated foreigncountries, nationals and others. HM Treasury regulations similarly require compliance with sanctions adopted by the UK government. Barclays has beenconducting an internal review of its conduct with respect to US Dollar payments involving countries, persons and entities subject to these sanctions and hasbeen reporting to governmental authorities about the results of that review. Barclays received inquiries relating to these sanctions and certain US Dollarpayments processed by its New York branch from the New York County District Attorney’s Office and the US Department of Justice, which along with otherauthorities, has been reported to be conducting investigations of sanctions compliance by non-US financial institutions. Barclays has responded to thoseinquiries and is cooperating with the regulators, the Department of Justice and the District Attorney’s Office in connection with their investigations ofBarclays conduct with respect to sanctions compliance. Barclays has also received a formal notice of investigation from the FSA, and has been keeping theFSA informed of the progress of the US investigations and Barclays internal review. Barclays review is ongoing. It is currently not possible to predict theultimate resolution of the issues covered by Barclays review and the investigations, including the timing and potential financial impact of any resolution,which could be substantial.



37 LeasingThe Group and the Bank are both lessor and lessee under finance and operating leases, providing asset financing for their customers and leasing assets fortheir own use. In addition, assets leased by the Group and the Bank may be sublet to other parties. An analysis of the impact of these transactions on theGroup and the Bank balance sheet and income statement is as follows:

(a) As Lessor

Finance lease receivablesThe Group and the Bank specialise in asset-based lending and work with a broad range of international technology, industrial equipment and commercialcompanies to provide customised finance programmes to assist manufacturers, dealers and distributors of assets.

Finance lease receivables are included within loans and advances to customers.

The Group and the Bank’s net investment in finance lease receivables was as follows:

2009 2008

Present PresentGross value of Gross value of

investment minimum Un- investment minimum Un-in Future lease guaranteed in Future lease guaranteed

finance lease finance payments residual finance lease finance payments residualreceivables income receivable values receivables income receivable values

£m £m £m £m £m £m £m £m

The GroupNot more than one year 3,513 (456) 3,057 55 3,929 (689) 3,240 149Over one year but not more than five years 7,597 (1,117) 6,480 154 8,668 (1,673) 6,995 355Over five years 2,084 (427) 1,657 407 3,419 (768) 2,651 25

Total 13,194 (2,000) 11,194 616 16,016 (3,130) 12,886 529

The BankNot more than one year 7 – 7 – 8 (1) 7 –Over one year but not more than five years 211 – 211 – 222 (7) 215 –Over five years 144 – 144 – 126 (4) 122 –

Total 362 – 362 – 356 (12) 344 –

The allowance for uncollectible finance lease receivables included in the allowance for impairment for the Group amounted to £321m at 31st December 2009 (2008: £189m).

Operating lease receivablesThe Group and the Bank acts as lessor, whereby items of plant and equipment are purchased and then leased to third parties under arrangementsqualifying as operating leases. The items purchased to satisfy these leases are treated as plant and equipment in the Group and the Bank’s financialstatements and are generally disposed of at the end of the lease term (see Note 22).

The future minimum lease payments expected to be received under non-cancellable operating leases at 31st December 2009 were as follows:

The Group The Bank

2009 2008 2009 2008

Plant and Plant and Plant and Plant andequipment equipment equipment equipment

£m £m £m £m

Not more than one year 10 80 – –Over one year but not more than two years 7 42 – –Over two years but not more than three years 7 36 – –Over three years but not more than four years 6 24 – –Over four years but not more than five years 8 13 – –Over five years 1 39 – –

Total 39 234 – –


37 Leasing continued(b) As Lessee

Finance lease commitmentsThe Group and the Bank lease items of property, plant and equipment on terms that meet the definition of finance leases. Finance lease commitments areincluded within other liabilities (see Note 24).

Obligations under finance leases were as follows:

The Group The Bank

2009 2008 2009 2008

Total future Total future Total future Total futureminimum minimum minimum minimumpayments payments payments payments

£m £m £m £m

Not more than one year 16 35 – 2Over one year but not more than two years 7 13 – 3Over two years but not more than three years 30 14 – 1Over three years but not more than four years 18 17 – –Over four years but not more than five years 17 14 – –Over five years 34 3 4 –

Net obligations under finance leases 122 96 4 6

The carrying amount of assets held under finance leases at the balance sheet date was:

The Group The Bank

2009 2008 2009 2008£m £m £m £m

Cost 127 87 – –Accumulated depreciation (84) (67) – –

Net book value 43 20 – –

Operating lease commitmentsThe Group and the Bank lease various offices, branches and other premises under non-cancellable operating lease arrangements. The leases have variousterms, escalation and renewal rights. There are no contingent rents payable. The Group and the Bank also lease equipment under non-cancellable leasearrangements.

Where the Group and the Bank are the lessees the future minimum lease payment under non-cancellable operating leases are as follows:

The Group The Bank

2009 2008 2009 2008Property Equipment Property Equipment Property Equipment Property Equipment

£m £m £m £m £m £m £m £mˆˆˆˆˆˆ

Not more than one year 459 9 275 5 215 2 45 2Over one year but not more than two years 424 6 354 1 218 – 223 –Over two years but not more three years 378 – 334 1 205 – 213 –Over three years but not more four years 334 – 315 – 186 – 197 –Over four years but not more than five years 341 – 465 5 171 – 185 –Over five years 2,933 3 2,744 1 1,645 3 1,782 –

Total 4,869 18 4,487 13 2,640 5 2,645 2

The total of future minimum sublease payments to be received under non-cancellable subleases at the balance sheet date is £147m (2008: £158m) for the Group and £123m (2008: £148m) for the Bank.



38 Disposal of subsidiariesDuring the year, the Group disposed of Barclays Global Investors (BGI) 50% of Barclays Vida y Pensiones Compania de Seguros and 7% of the GRCB –Emerging Markets Botswana business.

BGI Other Total2009 2009 2009

£m £m £m

Consideration received including hedging gains:Cash receiveda 4,207 158 4,365Non cash consideration 5,294 118 5,412Total consideration received 9,501 276 9,777

Assets and liabilities disposed of:AssetsCash and balances at central banks 667 – 667Financial assets designated at fair value:– Held on own account – 393 393– Held in respect of linked liabilities to customers under investment contracts 71,791 – 71,791Derivative financial instruments – 5 5Loans and advances to customers – 4 4Available for sale investments 55 788 843Other assets 398 204 602Goodwill and Intangible assets 1,586 – 1,586Property, plant and equipment 122 – 122Deferred tax assets 99 – 99Total 74,718 1,394 76,112LiabilitiesCustomer accounts – (368) (368)Liabilities to customers under investment contracts (71,791) (415) (72,206)Derivative financial instruments – (8) (8)Other liabilities (911) (74) (985)Current tax liabilities 35 – 35Insurance contract liabilities, including unit-linked liabilities – (354) (354)Deferred tax liabilities – (16) (16)Total (72,667) (1,235) (73,902)Net assets disposed of 2,051 159 2,210Group share of net assets disposed of 2,051 82 2,133Transaction costs (539) (10) (549)Amounts relating to non-controlling interests (580) – (580)Gain on sale before tax 6,331 184 6,515Tax (43) (28) (71)Gain on sale, net of tax 6,288 156 6,444

On 1st December 2009 the Group completed the sale of BGI to BlackRock, Inc. (BlackRock) recognising a profit on disposal before tax of £6,331m. The taxcharge of £43m reflects the application of UK substantial shareholdings relief in accordance with UK tax law.

The consideration at completion was $15.2bn (£9.5bn), including 37.567 million new BlackRock shares, giving an economic interest of 19.9% of theenlarged BlackRock group. Barclays Group holds only 4.9% of the voting rights and under the terms of the transaction may not acquire additional votingrights and will vote in accordance with the recommendations of the BlackRock Board of Directors. John Varley and Robert E Diamond Jr. have been appointedto the BlackRock Board, which comprises 18 Directors. The Group is not deemed to exercise significant influence and the investment has been accountedfor as an available for sale equity investment.

The Group has provided BlackRock with customary warranties and indemnities in connection with the sale. Barclays will also continue to indemnifysecurities lending arrangements until 30th November 2012 (included within contingent liabilities on page 84) and provide support to certain BGI cashfunds until December 2013 in the form of credit derivatives (included within derivative liabilities on page150) and financial guarantees (included withinprovisions on page 67).

In addition, Barclays, BlackRock and their respective affiliates also enter into agreements and transactions with one another in the ordinary course of theirrespective businesses and on an arm’s length commercial basis, subject to applicable regulation and agreements with relevant regulators.

In connection with its financing of its acquisition of BGI, BlackRock entered into a 364-day revolving credit facility with a group of lenders including Barclays,who is also acting as revolving agent. Of the $2bn credit facility, $0.8bn was committed by other lenders and following completion BlackRock had borrowedor notified to be borrowed $1.5bn under the facility. All amounts borrowed under this facility have been fully repaid and the facility was terminated prior to31st December 2009.

Prior year disposalsIn 2008, the Group disposed of Barclays Life Assurance Limited. There were no material disposals in 2007.

Notea Net cash consideration received from the sale of BGI, excluding the effect of hedging,

cash balances disposed of and transaction costs paid was £2,469m.


39 Discontinued operationsThe disposed BGI business has been treated as a discontinued operation, the results of which are set out below. For the year ended 31st December 2009the results are for the 11 month period up to the date of disposal.

2009 2008 2007£m £m £m

Net interest income 33 – 12Net fee and commission income 1,759 1,916 1,937Net trading (loss) / income 67 (10) 5Other income 4 10 2

Total income 1,863 1,916 1,956

Operating expenses excluding amortisation of intangible assets (1,123) (960) (1,095)Amortisation of intangible assets (14) (15) (8)

Operating expenses (1,137) (975) (1,103)

Profit before tax from discontinued operations 726 941 853 Tax on discontinued operations (237) (337) (282)

Profit after tax from discontinued operations 489 604 571

Profit on disposal of discontinued operationsa 6,331 – –Tax on disposal (43) – –

Net profit on the disposal of the discontinued operation 6,288 – –

Profit after tax from discontinued operations, including gain on disposal 6,777 604 571

Other comprehensive income relating to discontinued operations is as follows:

2009 2008 2007£m £m £m

Available for sale assets 10 (9) 1Currency translation reserve (85) 133 11Tax relating to components of other comprehensive income 17 (10) 14

Other comprehensive income, net of tax, from discontinued operations (58) 114 26

The cash flows attributable to the discontinued operations were as follows:

2009 2008 2007£m £m £m

Cash flows from discontinued operationsNet cash flows from operating activities 333 524 773Net cash flows from investing activities (25) (93) (248)Net cash flows from financing activities (550) (362) (429)Effects of exchange rates on cash and cash equivalents (134) 217 (13)

Net cash flows from discontinued operations (376) 286 83

Notea Details of the profit on disposal are shown in Note 39.



40 Acquisition of subsidiaries(a) Crescent Real EstateOn 19th November 2009, Barclays formed Crescent Real Estate Holdings LLC a joint venture with Goff Capital, Inc., to assume 99.7% ownership of Crescent Real Estate Equities Limited partnership (Crescent) following the completion of a debt restructuring transaction. Crescent is a real estateinvestment company that owns and manages office space, as well as investments in resort residential developments and luxury hotels across the US. Theseproperties are accounted for as investment properties.

The assets and liabilities of Crescent at acquisition were as follows:

Carrying value Fair value Fairpre-acquisition adjustments values

£m £m £m

AssetsLoans and advances to customers 85 – 85Investment in associates and joint ventures 132 (45) 87Property, plant and equipment 879 69 948Other assets 154 (2) 152

Total assets1,250 22 1,272

LiabilitiesDeposits from banks (170) – (170)Other liabilities (102) 3 (99)

Total liabilities (272) 3 (269)

Net assets 978 25 1,003

Group share of net assets acquired 978 25 1,003

Acquisition costLoans 1,003

Total consideration 1,003

No goodwill arose on acquisition.

The results of Crescent’s operations have been included from 19th November 2009 and did not materially contribute to the consolidated profit before tax.It is impracticable to disclose the revenue and profit or loss of the combined entity as though the acquisition date had been 1st January 2009.


40 Acquisitions of subsidiaries continued(b) Other acquisitionsOther acquisitions made by the Group during the year included 100% of PT Bank Akita on 1st February 2009 and 100% of the Portuguese credit cardbusiness of Citibank International PLC on 1st December 2009.

The Group increased its share in Abseq Properties (Pty) Ltd (previously accounted for as an associate) to 85% on 30th January 2009.

On 6th April 2009, the Group acquired 100% of Care Principles as part of a debt restructuring transaction.

None of these acquisitions were individually material.

Details of the net assets acquired and the consideration paid are set out in aggregate below. The results of their operations have been included from thedates acquired and contributed a loss of £17m to the consolidated profit before tax.

Carryingvalue pre- Fair value Other Fair

acquisition adjustments adjustments values£m £m £m £m

AssetsLoans and advances to customers 598 (9) – 589Investments in associates and joint ventures 3 – – 3Intangible assets – 75 16 91Property, plant and equipment 201 5 – 206Other assets 38 – – 38

Total assets 840 71 16 927

LiabilitiesDeposits from banks (806) 45 117 (644)Customer accounts (48) – – (48)Derivative financial instruments – (32) 19 (13)Deferred tax liabilities (14) (26) – (40)Other liabilities (111) 18 (2) (95)

Total liabilities (979) 5 134 (840)

Net assets acquired (139) 76 150 87

Group share of net assets acquired 66

Acquisition costCash Paid 24Deferred consideration 19Attributable costs 4

Total consideration 47

Goodwill 7

Gain on acquisition 26

Cash outflows in respect of acquisitionsThe aggregate net outflow of cash from the acquisition of the above Group entities was £28m, representing cash consideration and attributable costs.

Prior year acquisitions The initial accounting for the 2008 acquisition of the North American businesses of Lehman Brothers was completed on 22nd September 2009. There wereno revisions to the initial accounting disclosed in the 2008 financial statements. Approximately £2.3bn of the assets acquired as part of the acquisition hadnot been received by 31st December 2009, approximately £1.8bn of which were recognised as part of the accounting for the acquisition and are included inthe balance sheet as at 31st December 2009. Ongoing legal proceedings related to the acquisition, including in respect of assets not yet received, arediscussed in Note 35.

In addition, in 2008 the Group acquired Macquarie Bank Limited’s residential mortgage businesses, Goldfish credit card UK businesses and 100% of theordinary shares of Expobank.

In 2007, the Group acquired 100% of the ordinary shares of each of Indexchange Investment AG, Equifirst Corporation and Walbrook Group Limited.



41 Investments in subsidiariesInvestments in subsidiaries, the principal of which are engaged in banking related activities, are recorded on the balance sheet at historical cost, lessdividends received out of the pre-acquisition profits of the subsidiaries and any impairment. At 31st December 2009 the historical cost of investments insubsidiaries was £20,700m (2008: £19,218m), and allowances recognised against these investments was £1,382m (2008: £1,803m) of impairment and£522m (2008: £493m) dividends received out of pre-acquisition profits of the subsidiaries. Details of the principal subsidiaries are shown in Note 42.

Principal subsidiariesPercentage

of equityCountry of registration capital heldor incorporation Company name Nature of business %

Botswana Barclays Bank of Botswana Limited Banking 67.8Egypt Barclays Bank Egypt SAE Banking 100England Barclays Mercantile Business Finance Limited Loans and advances including leases to customers 100*England Barclays Bank Trust Company Limited Banking, securities industries and trust services 100*England Barclays Stockbrokers Limited Stockbroking 100*England Barclays Capital Securities Limited Securities dealing 100*England FIRSTPLUS Financial Group PLC Secured loan provider 100England Gerrard Investment Management Limited Investment management 100*Ghana Barclays Bank of Ghana Limited Banking 100Ireland Barclays Insurance (Dublin) Limited Insurance provider 100*Ireland Barclays Assurance (Dublin) Limited Insurance provider 100*Isle of Man Barclays Private Clients International Limited Banking 100Japan Barclays Capital Japan Limited Securities dealing 100*Jersey Barclays Private Bank & Trust Limited Banking, trust company 100*Kenya Barclays Bank of Kenya Limited Banking 68.5Russia Barclays Bank LLC Banking 100*South Africa Absa Group Limited Banking 55.5Spain Barclays Bank SA Banking 99.7Switzerland Barclays Bank (Suisse) S.A. Banking and trust services 100USA Barclays Capital Inc. Securities dealing 100*USA Barclays Financial Corporation Holding company for US credit card issuer 100*USA Barclays Group US Inc. Holding company 100Zimbabwe Barclays Bank of Zimbabwe Limited Banking 67.7*

In accordance with Section 410(2)(a) of the Companies Act 2006, the above information is provided solely in relation to principal subsidiaries.

The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries. Investments in these subsidiaries areheld directly by Barclays Bank PLC except where marked *.

Full information of all subsidiaries will be included in the Annual Return to be filed at UK Companies House.


41 Investments in subsidiaries continuedEntities in which the Group holds less than half the voting rightsThere are a number of entities in which the Group holds less than half the voting rights which are consolidated when the substance of the relationshipbetween the Group and the entity indicates that the entity is controlled by the Group. Such entities are deemed to be controlled by the Group whenrelationships with such entities give rise to benefits that are in substance no different from those that would arise were the entity a subsidiary.

The consolidation of such entities may be appropriate in a number of situations, but primarily when:

– the operating and financial policies of the entity are closely defined from the outset (i.e. it operates on an ‘autopilot’ basis) with such policies being largelydetermined by the Group;

– the Group has rights to obtain the majority of the benefits of the entity and/or retains the majority of the residual or ownership risks related to the entity; or

– the activities of the entity are being conducted largely on behalf of the Group according to its specific business objectives.

Such entities are created for a variety of purposes including securitisation, structuring, asset realisation, intermediation and management.

Subsidiaries with a different reporting date from that of the parent of 31st DecemberEntities may have a different reporting date from that of the parent of 31st December. Dates may differ for a variety of reasons including local reportingregulations or tax laws. In accordance with our accounting policies, for the purpose of inclusion in the consolidated financial statements of Barclays PLC,entities with different reporting dates are made up until 31st December.

Entities where the Group’s interest exceeds 50% which are excluded from consolidationAlthough the Group’s interest in the equity voting rights in certain entities exceeds 50%, or it may have the power to appoint a majority of their Boardsof Directors, they are excluded from consolidation because the Group either does not direct the financial and operating policies of these entities, or onthe grounds that another entity has a superior economic interest in them. Consequently, these entities are not deemed to be controlled by Barclays.

The table below includes information in relation to such entities as required by the Companies Act 2006 Section 410(2)(b).

Equity RetainedPercentage of share- loss

ordinary share holders’ for theCountry of registration capital held funds yearor incorporation Name % £m £m

UK Fitzroy Finance Limited 100 – –Cayman Islands Palomino Limited 100 1 –



42 Related party transactions and Directors’ remuneration(a) Related party transactionsParties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in makingfinancial or operational decisions, or one other party controls both. The definition includes subsidiaries, associates, joint ventures and the Group’s pensionschemes, as well as other persons.

(i) The GroupParent companyThe parent company, which is also the ultimate parent company, is Barclays PLC, which holds 100% of the issued ordinary shares of Barclays Bank PLC.

SubsidiariesTransactions between Barclays Bank PLC and subsidiaries also meet the definition of related party transactions. Where these are eliminated onconsolidation, they are not disclosed in the Group financial statements. A list of the Group’s principal subsidiaries is shown in Note 41.

Associates, joint ventures and other entitiesThe Group provides banking services to associates, joint ventures, the Group pension funds (principally the UK Retirement Fund) and to entities undercommon directorships, providing loans, overdrafts, interest and non-interest bearing deposits and current accounts to these entities as well as otherservices. Group companies also provide investment management and custodian services to the Group pension schemes. The Group also provides bankingservices for unit trust and investment funds managed by Group companies and are not individually material. All of these transactions are conducted on thesame terms as third-party transactions.

Entities under common directorshipsThe Group enters into normal commercial relationships with entities for which members of the Group’s Board also serve as Directors. The amounts included inthe Group’s financial statements relating to such entities that are not publicly listed are shown in the table opposite under Entities under common directorships.

Amounts included in the accounts, in aggregate by category of related party entity are as follows:

PensionEntities funds unit

under trusts andJoint common investment

Associates ventures directorships funds Total£m £m £m £m £m

For the year ended as at 31st December 2009Income statementInterest received 3 90 7 – 100Interest paid – (18) – – (18)Fees received for services rendered (including investment management and custody and commissions) 10 9 – 6 25Fees paid for services provided (47) (113) – – (160)Principal transactions (11) (35) 6 – (40)Impairment (2) (5) – – (7)

Assets:Loans and advances to banks and customers 144 1,145 192 – 1,481Derivative transactions 3 8 48 – 59Other assets 76 193 – – 269

Liabilities:Deposits from banks – 654 – – 654Customer accounts 54 252 29 23 358Derivative transactions – 3 10 – 13Other liabilities 2 22 – 23 47

For the year ended as at 31st December 2008Income statementInterest received – 105 3 – 108Interest paid – (73) – – (73)Fees received for services rendered (including investment managementand custody and commissions) – 15 – 5 20Fees paid for services provided (44) (146) – – (190)Principal transactions 8 59 60 (25) 102

AssetsLoans and advances to banks and customers 110 954 34 – 1,098Derivative transactions – 9 311 15 335Other assets 67 276 – 3 346

LiabilitiesDeposits from banks – 592 – – 592Customer accounts – 167 74 10 251Derivative transactions – – 111 41 152Other liabilities 3 18 – 28 49

No guarantees, pledges or commitments have been given or received in respect of these transactions in 2009 or 2008.


42 Related party transactions and Directors’ remuneration continuedDerivatives transacted on behalf of the Pensions Funds Unit Trusts and Investment funds amounted to £192m (2008: £318m).

In 2008 Barclays paid £12m of its charitable donations through the Charities Aid Foundation, a registered charitable organisation, in which a Director of theCompany is a Trustee. In 2009, following personnel changes, Charities Aid Foundation is not a related party.

(ii) The BankSubsidiariesDetails of principal subsidiaries are shown in Note 42.

The Bank provides certain banking and financial services to subsidiaries.

The Bank also provides a number of normal current and interest bearing cash accounts to the Group pension funds (principally the UK Retirement Fund) inorder to facilitate the day to day financial administration of the funds.

Group companies also provide investment management and custodian services. The Bank also provides normal banking services for unit trusts and investment funds managed by Group companies. These transactions are conducted on similar terms to third-party transactions and are notindividually material.

In aggregate, amounts included in the accounts are as follows:

Entities Pensionunder funds unit

common trusts and Joint director- investment

Subsidiaries Associates ventures ships funds Total£m £m £m £m £m £m

For the year ended as at 31st December 2009AssetsLoans and advances to banks and customers 227,336 144 1,145 192 – 228,817Derivative transactions 21,579 3 8 48 – 21,646Other assets 65,838 76 193 – – 66,107

LiabilitiesDeposits from banks 17,945 – 654 – – 18,599Customer accounts 209,766 54 252 29 23 210,124Derivative transactions 23,181 – 3 10 – 23,194Other liabilities 82,703 2 22 – 23 82,750

For the year ended as at 31st December 2008AssetsLoans and advances to banks and customers 230,150 110 954 34 – 231,248Derivative transactions 27,927 – 9 311 15 28,262Other assets 51,330 67 276 – 3 51,676

LiabilitiesDeposits from banks 17,481 – 592 – – 18,073Customer accounts 200,761 – 167 74 10 201,012Derivative transactions 31,099 – – 111 41 31,251Other liabilities 78,127 3 18 – 28 78,176

It is the normal practice of the Bank to provide its subsidiaries with support and assistance by way of guarantees, indemnities, letters of comfort andcommitments, as may be appropriate, with a view to enabling them to meet their obligations and to maintain their good standing, including commitmentof capital and facilities.

For dividends paid to Barclays PLC see Note 1.

Key Management PersonnelThe Group’s key Management Personnel, and persons connected with them, are also considered to be related parties for disclosure purposes. Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of Barclays Bank PLC (directly or indirectly) and comprise the Directors of Barclays Bank PLC and the Officers of the Group, certain direct reports of the Group Chief Executive and the heads of major business units.

There were no material related party transactions with Entities under common directorship where a Director or other member of Key ManagementPersonnel (or any connected person) is also a Director or other member of Key Management Personnel (or any connected person) of Barclays.



42 Related party transactions and Directors’ remuneration continuedThe Group provides banking services to Directors and other Key Management Personnel and persons connected to them. Transactions during the year andthe balances outstanding at 31st December 2009 were as follows:

Directors, other KeyManagement Personneland connected parties

2009 2008£m £m

Loans outstanding at 1st January 7.4 7.6Loans issued during the year 1.9 6.9Loan repayments during the year (1.6) (5.4)

Loans outstanding at 31st December 7.7 9.1

Interest income earned 0.1 0.4

No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any connected person)in 2009 or 2008.

2009 2008£m £m

Deposits outstanding at 1st January 28.7 8.9Deposits received during the year 160.0 235.7Deposits repaid during the year (158.0) (221.9)

Deposits outstanding at 31st December 30.7 22.7

Interest expense on deposits 0.1 0.5

During 2009 the membership of the Group Executive Committe increased. These additional persons became Officers of the Group and as such areincluded in the 2009 definition of Key Management Personnel, but not in 2008.

Of the loans outstanding above, £0.1m (2008: £1.6m) relates to Directors and other Key Management Personnel (and persons connected to them) that leftduring the year. Of the deposits outstanding above, £3.7m (2008: £6.1m) relates to Directors and other Key Management Personnel (and personsconnected to them) that left the Group during the year. The amounts disclosed as at 1st January includes deposits outstanding for those who becameDirectors or Key Management Personnel during the year.

All loans to Directors and other key management personnel (and persons connected to them) (a) were made in the ordinary course of business, (b) weremade on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with otherpersons and (c) did not involve more than a normal risk of collectability or present other unfavourable features; with the exception of £2,130 provided on aninterest free basis.

The loans of £2,130 provided on an interest free basis were granted to two non-Director members of Barclays key management to purchase commuter railtickets. The maximum loans outstanding during the year were £4,260. Commuter rail ticket loans are provided to all Barclays staff members upon requeston the same terms.

Remuneration of Directors and other Key Management Personnel

Directors and other Key

Management Personnel

2009 2008£m £m

Salaries and other short-term benefits 8.8 10.8Pension costs 0.7 0.9Other long-term benefits 2.6 1.6Share-based payments 15.8 11.8Employer social security charges on emoluments 2.9 2.7

30.8 27.8


42 Related party transactions and Directors’ remuneration continued(b) Disclosure required by the Companies Act 2006The following information is presented in accordance with the Companies Act 2006.

Directors’ remuneration

2009 2008£m £m

Aggregate emoluments 8.8 6.0Gains made on the exercise of share options 8.9 –Amounts paid under long-term incentive schemes – 7.4

17.7 13.4

Actual pension contributions of £18,786 were paid to money purchase schemes on behalf of one Director (2008: £11,745, one Director). Notional pensioncontributions to money purchase schemes were £nil (2008: £nil).

As at 31st December 2009, two Directors were accruing retirement benefits under a defined benefit scheme (2008: two Directors).

Of the figures in the table above, the amounts attributable to the highest paid Director are as follows:

2009 2008£m £m

Aggregate emoluments 2.8 1.1Accrued pension (2009: £nil, 2008: £572,000) – 0.6

There were no actual or notional pension contributions to money purchase schemes in 2009 or 2008.

One Director (Frits Seegers) agreed to waive his fees as non-executive Director of Absa Group Limited and Absa Bank Limited. The fees for 2009 wereZAR 0.1m (£0.01m). The fees for 2008 were ZAR 0.4m (£0.03m) . In both 2008 and 2009 the fees were paid to Barclays.

Advances and credit to Directors and guarantees on behalf of Directors. In accordance with Section 413 of the Companies Act 2006 and in relation to those who served as Directors of the Company at any time in the financial year,the total amount of advances and credits at 31st December 2009 was £1.8m (2008: £0.8m). The total amount of guarantees on behalf of Directors at 31st December 2009 was £nil (2008: £nil).

43 Events after the balance sheet dateOn 1st January 2010, the Group acquired 100% ownership of Standard Life Bank Plc for a consideration of £227m in cash. The assets acquired include asavings book of approximately £5.8bn, and a mortgage book with outstanding balances of approximately £7.5bn.

As announced on 3rd November 2009, the Group has made changes to its business structure, which will be reflected in the Group’s external financialreporting for periods commencing 1st January 2010. The segmental information presented in Note 53 represents the business segments and otheroperations used for management and reporting purposes during the year ended 31st December 2009.



44 Share-based paymentsThe Group operates share schemes for employees throughout the world. The main current schemes are:

SharesaveEligible employees in the UK, Spain and Ireland may participate in the Barclays Sharesave scheme. Under this scheme, employees may enter into contractsto save up to £250 per month (Ireland: ¤500, Spain: ¤135) and, at the expiry of a fixed term of three, five or seven years (Spain: three years), have the optionto use these savings to acquire shares in the Company at a discount, calculated in accordance with the rules of the scheme. The discount is currently 20%of the market price at the date the options are granted. Participants in the scheme have six months from the date of vest in which the option can beexercised.

UK SharepurchaseUK Sharepurchase was introduced in January 2002. It is an HM Revenue & Customs approved all-employee share plan. The plan is open to all eligible UKemployees, including executive Directors. Under the plan, participants are able to purchase up to £1,500 worth of Barclays PLC ordinary shares per tax year,which, if kept in trust for five years, can be withdrawn from the plan tax-free. Matching shares were introduced to the scheme during 2005 where thepurchase of Barclays shares by the participant are matched equally by the Company up to a value of £600 per tax year. Any shares in the plan will earndividends in the form of additional shares, which must normally be held by the trustee for three years before being eligible for release.

Global SharepurchaseGlobal Sharepurchase was introduced in August 2009. The plan is open to all eligible employees in countries outside the UK, including executive Directors.In 2009, the plan was launched in Germany, Hong Kong, Japan, Singapore and Switzerland. Under the plan, participants are able to purchase up to £1,500worth of Barclays PLC ordinary shares per calendar year, from post-tax salary. The purchase of Barclays shares by the participant is matched by theCompany on a one-for-one basis up to a value of £600 per calendar year. Matching Shares are forfeited if the participant chooses to sell shares purchasedfrom their post-tax salary before the third anniversary of purchase. Any shares in the plan will earn dividends in the form of additional shares, which mustnormally be held by the trustee for three years before being eligible for release.

Executive Share Award Scheme (ESAS) For certain employees of the Group an element of their annual bonus is in the form of a deferred award of a provisional allocation of Barclays PLC sharesunder ESAS. The total value of the bonus made to the employee of which ESAS is an element is dependent upon the business unit, Group and individualemployee performance. The ESAS element of the annual bonus must normally be held for at least three years. Additional bonus shares are subsequentlyawarded to recipients of the provisional allocation and vest upon achieving continued service for three and five years from the date of award. ESAS awardsare also made to eligible employees for recruitment purposes. All awards are subject to potential forfeit if the individual resigns and commences work with acompetitor business.

Performance Share Plan (PSP)The Performance Share Plan (PSP) was approved by shareholders at the 2005 AGM to replace the ISOP scheme. Performance shares are ‘free’ Barclaysshares for which no exercise price is payable and which qualify for dividends. Performance share awards are communicated to participants as an initialallocation. Barclays performance over a three-year period determines the final number of shares that may be released to participants.

Incentive Share Plan (Incentive Shares)The Incentive Share Plan (Incentive Shares) was introduced in March 2008. Incentive Shares are granted to participants in the form of a provisionalallocation of Barclays shares which vest upon achieving continued service after three years. Participants do not pay to receive an award or to receive arelease of shares. Incentive Shares qualify for dividends.

Options granted under the following schemes are over subsidiaries of Barclays PLC:

Absa Group Limited Share Incentive Trust (AGLSIT)In terms of the rules of Absa Group Limited Share Incentive Trust, the maximum number of shares which may be issued or transferred and/or in respect ofwhich options may be granted to the participants shall be limited to shares representing 10% of the total number of issued shares from time to time. This isan equity-settled share-based payment arrangement and options are allocated to Absa employees according to the normal human resources talentmanagement processes. The options issued up to August 2005 had no performance criteria linked to them and vested in equal tranches after three, fourand five years respectively. No dividends accrue to the option holder over the vesting period. The options expire after a period of ten years from the issuingdate. Options issued since August 2005 have performance criteria associated with them, which require headline earnings per share to exceed an agreedbenchmark over a three-year period from the grant date for the options to vest. Participants need to be in the employ of Absa at the vesting date in order tobe entitled to the options.

Absa Group Limited Executive Share Award Scheme (AGLESAS)The ESAS is an equity-settled share-based payment arrangement, where the participant’s notional bonus comprises a number of restricted nil-cost options,based on the allocation price of ordinary shares. Such an initial allocation is held in trust or in the name of the participant. If the participant is in the employ ofAbsa after the three-year vesting period, the participant will receive 20% matched shares. If the bonus award remains in the ESAS for another two years, theparticipant receives another 10% matched shares. Dividend shares are paid to participants on the ordinary shares as if the shares were held from inception.The number of dividend shares awarded is therefore calculated on the initial allocation and on the 20% and/or 10% matched shares, over the three- or five-year period. Employees that receive a performance bonus in excess of a predetermined amount were compelled to place a set percentage of their bonusaward into the ESAS. Employees also had the option of utilising more of their bonus award for voluntary ESAS options.


44 Share-based payments continuedAbsa Group Limited Performance Share Plan (AGLPSP)The Performance Share Plan (PSP) was implemented in 2008. Performance shares are ‘free’ Absa Group Limited shares for which no exercise price ispayable and which qualify for dividends. Performance share awards are communicated to participants as an initial allocation. Absa Group Limited’sperformance over a three-year period determines the final number of shares that may be released to participants.

Options remain outstanding under the following closed schemes:

Incentive Share Option Plan (ISOP)The ISOP was open by invitation to the employees and Directors of Barclays PLC. Options were granted at the market price at the date of grant calculated inaccordance with the rules of the plan, and are normally exercisable between three and ten years from that date. The final number of shares over which theoption may be exercised is determined by reference to set performance criteria. The number of shares under option represents the maximum possiblenumber that may be exercised. No awards were made under ISOP during 2009.

Woolwich Executive Share Option Plan (Woolwich ESOP)Options originally granted over Woolwich PLC shares at market value were exercised in 2001 or exchanged, in accordance with the proposals made underthe offer to acquire the Woolwich, for options over Barclays PLC shares. Under the rules of ESOP, the performance conditions attached to the exercise ofoptions were disapplied on acquisition of Woolwich PLC by Barclays. Options lapse ten years after grant.

In addition, there were no options outstanding at year end under the following closed schemes:

Absa Group Broad-based Black Economic Empowerment transaction (BEE) The Group entered into a black economic empowerment (BEE) transaction with Batho Bonke Capital (Proprietary) Limited in July 2004. The shares issued interms of the transaction vested immediately. Due to the shares issued vesting immediately and also as a result of the issue being before 1st January 2005,the provisions of IFRS 2 Share-based payments were not applicable. In the current period 49.9% of the options were repurchased from Batho Bonke(Proprietary) Limited at a discount to their fair value. Batho Bonke utilised the proceeds to exercise 11 970 536 options. The Group provided bridgingfinance for the remaining 24 678 764 options. The life of these options was effectively extended for three months, effective 1st June 2009. The modificationdid not result in an increase in the fair value of these options and therefore, in terms of the provisions of IFRS 2, no cost was recognised in the statement ofcomprehensive income in the current period.

The bridging finance was redeemed on 1st September 2009 and Batho Bonke Capital (Proprietary) Limited exercised the balance of the optionsoutstanding.

Absa Group Limited Share Ownership Administrative Trust (AGLSOT)AGLSOT enabled all Absa employees to participate in a one-off offer to purchase 200 redeemable cumulative option-holding preference shares. Eachredeemable preference share carries the option to acquire one Absa ordinary share. Options vest after three years and lapse after five years from the date ofissue. Exercise may occur in lots of 100 only and within a price range varying from R48 to R69 (£3.81 to £5.48) dependent on the 30-day volume weightedtrading price on the JSE Limited. Options are redeemed by Absa on the final exercise date.

Executive Share Option Scheme (ESOS) The ESOS is a long-term incentive scheme and was available by invitation to certain senior executives of the Group with grants usually made annually.Options were issued with an exercise price equivalent to the market price at the date of the grant without any discount, calculated in accordance withthe rules of the scheme, and are normally exercisable between three and ten years from that date. No further awards are made under ESOS.

Barclays Global Investors Equity Ownership Plan (BGI EOP)The Equity Ownership Plan was provided to key employees of BGI and was wound up following the disposal of BGI. The exercise price of the options wasdetermined by the Remuneration Committee of Barclays PLC based on the fair value of BGI as determined by an independent appraiser. The options weregranted over shares in Barclays Global Investors UK Holdings Limited, a subsidiary of Barclays Bank PLC.

Options were not exercisable until vesting, with a third of the options held generally becoming exercisable at each anniversary of grant. The shareholderhad the right to offer to sell the shares to Barclays Bank PLC 355 days following the exercise of the option. The most recently agreed valuation was £109.45,at 30th November 2009. No awards were made under the BGI EOP in 2009.

The scheme rules provided that in the event of a sale of the business, outstanding options vest before the disposal. During the year the Group disposed ofBarclays Global Investors. Accordingly the share based payment charge has been accelerated in these financial statements.



44 Share-based payments continuedAt the balance sheet date the following cash-settled schemes operated within the Group:

Absa Group Limited Phantom Performance Share Plan (Phantom PSP)The Phantom PSP is a cash-settled plan and payments made to participants in respect of their awards are in the form of cash. The Phantom PSP shares (andany associated notional dividend shares) are awarded at no cost to the participants. The amount that is ultimately paid to the participants is equal to themarket value of a number of ordinary shares as determined after a three-year vesting period. The vesting of the Phantom PSP awards will be subject to twonon-market performance conditions which will be measured over a three-year period, starting on the first day of the financial year in which the award ismade. The award will vest after three years to the extent that the performance conditions are satisfied. These awards are forfeited in total if Absaperformance fails to meet the minimum criteria.

Absa Group Limited Phantom Executive Share Award Scheme (Phantom ESAS)The Phantom ESAS is a cash-settled share-based payment arrangement, where the participant’s notional bonus comprises a number of restricted nil-costoptions, based on the allocation price of ordinary shares. If the participant is in the employ of the Group after the three-year vesting period, the participantwill receive 20% bonus phantom shares. If the bonus award remains in the Phantom ESAS for another two years, the participant receives an additional 10%bonus phantom shares. Dividend phantom shares are paid to participants on the ordinary phantom shares as if the shares were held from inception. Thenumber of dividend phantom shares awarded is therefore calculated on the initial allocation and on the 20% and 10% bonus phantom shares, over thethree or five-year period. Employees that receive performance bonuses in excess of a predetermined amount are compelled to place a set percentage of thebonus award in the Phantom ESAS. Employees also have the option of utilising more of their bonus award for voluntary ESAS phantom shares.

The weighted average fair value per option granted during the year is as follows:

2009 2008£ £

Sharesave 1.43 0.92PSP 2.81 4.89Sharepurchase 1.82 3.38ISP 2.58 4.22ESAS 1.08 4.09AGLPSP 6.88 7.76AGLESAS 6.82 7.17

Fair values for Sharesave and PSP are calculated at the date of grant using either a Black-Scholes model or Monte Carlo simulation. Sharepurchase, ISP,ESAS, AGLPSP and AGLESAS are nil cost awards on which the performance conditions are substantially completed at the date of grant. Consequently thefair value of these awards is based on the market value at that date.

As described above, the terms of the ESAS scheme require shares to be held for a set number of years from the date of vest. The calculation of the vestdate fair value of such awards includes a reduction for this post-vesting restriction. This discount is determined by calculating how much a willing market participant would rationally pay to remove the restriction using a Black-Scholes option pricing model. The total discount required in 2009 is £10m (2008: £10m)_.

The significant weighted average assumptions used to estimate the fair value of the options granted in 2009 are as follows:

2009

Sharesave PSP

Weighted average share price 3.51 2.34Weighted average exercise price 2.70 1.77Expected volatility 45% 45%Expected option life 4 years 2 years


2008

Sharesave PSP

Weighted average share price 3.11 5.45Weighted average exercise price 2.51 2.07Expected volatility 37% 37%Expected option life 4 years 3 years


2007

Sharesave PSP BGI EOP AGLSIT

Weighted average share price 5.82 7.07 95.33 9.18Weighted average exercise price 4.81 – 95.33 7.62Expected volatility 25% 25% 20% 30%Expected option life 4 years 3 years 4 years 5 years


44 Share-based payments continuedExpected volatility and dividend yield on the date of grant have been used as inputs into the respective valuation models for Sharesave and PSP.

The yield on UK government bonds with a commensurate life has been used to determine the risk-free discount rate of 3% for Sharesave and PSP. Optionlife is estimated based upon historical data for the holding period of options between grant and exercise dates.

For the purposes of determining the expected life and number of options to vest, historical exercise patterns have been used, together with an assumptionthat a certain percentage of options will lapse due to leavers.

The assumed dividend yield for Barclays PLC is the average annual dividend yield on the date of grant of 2%.

Analysis of the movement in the number and weighted average exercise price of options is set out below:

Sharesave a Sharepurchase a, c

Number Weighted average Number Weighted average(000s) ex. price (£) (000s) ex. price (£)

2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year 94,131 74,027 1.83 4.48 6,961 3,824 – – Granted in the year 28,005 56,024 2.70 2.51 6,832 3,834 – – Adjustment in grants for open offer – 1,354 – 4.33 – – – – Exercised/released in the year (153) (3,357) 2.83 3.71 (952) (64) – – Less: forfeited in the year (30,672) (33,917) 3.58 4.35 (521) (633) – – Less: expired in the year – – – – – – – – Outstanding at end of year 91,311 94,131 3.01 1.83 12,320 6,961 – –

Of which exercisable: 7,537 4,025 4.19 3.71 1,621 737 – –

ESAS a, c PSP a, c


2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year 267,937 182,200 – – 50,729 63,163 – –Granted in the year 311,977 141,269 – – 4,794 8,528 – –Adjustment in grants for open offer – 6,884 – – – 1,370 – –Exercised/released in the year (90,296) (56,231) – – (6,496) (1,467) – –Less: forfeited in the year (25,107) (6,185) – – (17,765) (20,865) – –Less: expired in the year – – – – – – – –Outstanding at end of year 464,511 267,937 – – 31,262 50,729 – –

Of which exercisable: 12,714 15,131 – – – – – –

ISP a,c Absa BEE b


2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year/acquisition date 7,100 – – – 73,152 73,152 3.16-4.55 3.40-3.89Granted in the year 50,652 6,923 – – – – – –Adjustment in grants for open offer – 177 – – – – – – Exercised/released in the year (19) – – – (36,649) – 5.42 –Less: repurchased in the year – – – – (36,503) – – –Less: forfeited in the year (2,755) – – – – – – –Less: expired in the year – – – – – – – –Outstanding at end of year 54,978 7,100 – – – 73,152 – 3.16-4.55

Of which exercisable: – – – – – 73,152 – 3.16-4.55

Notesa Options/award granted over Barclays PLC shares.b Options/award granted over Absa Group Limited shares.c Nil cost award .



44 Share-based payments continued

AGLSITb AGLSOTb


2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year/acquisition date 9,967 13,618 4.91 4.81 559 946 3.16-4.55 3.40-3.89Exercised/released in the year (3,569) (3,252) 5.10 3.37 (539) (368) 5.33 –Less: forfeited in the year (100) (399) 6.99 4.96 (20) (19) 3.81-5.48 3.16-4.55Outstanding at end of year 6,298 9,967 6.28 4.91 – 559 – 3.16-4.55

Of which exercisable: 5,016 5,944 5.67 3.86 – 559 – 3.16-4.55

AGLPSP b, c AGLESAS b,c


2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year 2,008 – – – 1,015 37 – –Granted in the year 1,589 2,134 – – 1,324 1,019 – –Less: forfeited in the year (180) (126) – – (155) (41) – –Outstanding at end of year 3,417 2,008 – – 2,184 1,015 – –

Of which exercisable: – – – – – – – –

ISOPa ESOSa


2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year 20,547 20,549 4.44 4.56 473 1,423 4.33 4.13Adjustment in grants for open offer – 537 – 4.44 – 12 – 4.33Exercised/released in the year (253) (539) 3.17 4.06 – (70) – 3.97 Less: forfeited in the year (7,648) – 4.54 – (473) (892) 4.33 3.97 Less: expired in the year – – – – – – – – Outstanding at end of year 12,646 20,547 4.41 4.44 – 473 – 4.33

Of which exercisable: 12,646 20,547 4.41 4.44 – 473 – 4.33

Woolwich ESOP a BGI EOP d


2009 2008 2009 2008 2009 2008 2009 2008

Outstanding at beginning of year 442 540 3.70 3.81 6,584 7,502 78.50 75.66Adjustment in grants for open offer – 12 – 3.70 – – – –Exercised/released in the year (7) (104) 3.20 3.10 (6,417) (550) 78.16 34.55Less: forfeited in the year (89) (6) 3.80 3.65 (167) (368) 91.54 86.57Less: expired in the year (281) – – – – – – –Outstanding at end of year 65 442 3.20 3.70 – 6,584 – 78.50

Of which exercisable: 65 442 3.20 3.70 – 3,631 – 69.29

Notesa Options/award granted over Barclays PLC shares.b Options/award granted over Absa Group Limited shares.c Nil cost award .d Options/award granted over Barclays Global Investors UK Holdings Limited shares.


44 Share-based payments continuedThe table below shows the weighted average share price at the date of exercise/release of shares:

2009 2008£ £

Sharesavea 3.21 4.70Sharepurchase a, c 2.64 1.59ESAS a, c 2.02 4.07PSP a, c 1.77 2.07BGI EOP d 109.45 87.22Absa BEE b 7.92 –AGLSIT b 9.18 6.78AGLSOT b 7.86 6.79ISP a, c 3.43 –ISOPa 3.61 4.59ESOS a – 4.74Woolwich ESOP a 3.52 4.72

The exercise price range, the weighted average contractual remaining life and number of options outstanding (including those exercisable) at the balancesheet date are as follows:

2009 2008

Weighted Weightedaverage average

remaining Number remaining Numbercontractual of options contractual of options

Exercise Price Range life in years outstanding life in years outstanding

Sharesave a

£1.44-£2.49 2 1,817,640 3 2,121,926£2.50-£3.49 3 69,543,729 4 54,437,940£3.50-£4.49 1 9,057,990 1 19,986,642£4.50-£5.49 2 10,892,016 3 17,584,689Sharepurchase a, c 2 12,319,993 2 6,960,593ESAS a, c 3 464,511,395 3 267,936,513ISP a, c 2 54,978,012 2 7,099,655PSP a, c 1 31,261,898 1 50,729,245AGLSITb

£1.66-£7.50 5 6,298,491 6 9,967,000AGLESAS b, c 3 2,184,286 3 1,015,000AGLPSP b, c 2 3,417,488 2 2,008,000ISOP a

£2.50-£3.49 3 2,701,442 4 3,862,322£3.50-£4.49 1 955,045 2 1,558,449£4.50-£5.49 3 8,989,576 4 14,899,933£5.50-£6.49 – – 7 225,894ESOS a

£2.50-£3.49 – – – –£3.50-£4.49 – – 1 472,561Woolwich ESOP a

£2.50-£3.49 – 65,024 1 89,644£3.50-£4.49 – – 1 352,961

There were no modifications to the share-based payment arrangements in the years 2009, 2008 and 2007. As at 31st December 2009, the total liabilityarising from cash-settled share-based payment transactions was £13m (2008: £23m).

In accordance with the scheme rules, all options awarded vested and exercised by the holders on the disposal of the BGI business on 1st December 2009 onwhich date the scheme ended. The options were all exercised during December 2009.

Notesa Options/award granted over Barclays PLC shares.b Options/award granted over Absa Group Limited shares.c Nil cost award .d Options/award granted over Barclays Global Investors UK Holdings Limited shares.



45 Off balance sheet arrangementsIn the ordinary course of business and primarily to facilitate client transactions, the Group enters into transactions which may involve the use of off-balance sheet arrangements and special purpose entities (SPEs). These arrangements include the provision of guarantees, loan commitments, retainedinterests in assets which have been transferred to an unconsolidated SPE or obligations arising from the Group’s involvements with such SPEs.

GuaranteesThe Group issues guarantees on behalf of its customers. In the majority of cases, the Group will hold collateral against the exposure, have a right of recourseto the customer or both. In addition, the Group issues guarantees on its own behalf. The main types of guarantees provided are: financial guarantees givento banks and financial institutions on behalf of customers to secure loans; overdrafts; and other banking facilities, including stock borrowing indemnitiesand standby letters of credit. Other guarantees provided include performance guarantees, advance payment guarantees, tender guarantees, guarantees toHer Majesty’s Revenue and Customs and retention guarantees. The nominal principal amount of contingent liabilities with off-balance sheet risk is set out inNote 34 (Contingent liabilities and commitments).

Loan commitmentsThe Group enters into commitments to lend to its customers subject to certain conditions. Such loan commitments are made either for a fixed period or arecancellable by the Group subject to notice conditions. Information on loan commitments and similar facilities is set out in Note 34 (Contingent liabilities andcommitments).

LeasingThe Group leases various offices, branches, other premises and equipment under non-cancellable operating lease arrangements. With such operating leasearrangements, the asset is kept on the lessor’s balance sheet and the Group reports the future minimum lease payments as an expense over the lease term.Information on leasing can be found in Note 37 (Leasing).

Special purpose entitiesSPEs are entities that are created to accomplish a narrow and well defined objective. There are often specific restrictions or limits around their ongoingactivities. The Group’s transactions with SPEs take a number of forms, including:

– The provision of financing to fund asset purchases, or commitments to provide finance for future purchases.

– Derivative transactions to provide investors in the SPE with a specified exposure.

– The provision of liquidity or backstop facilities which may be drawn upon if the SPE experiences future funding difficulties.

– Direct investment in the notes issued by SPEs.

Depending on the nature of the Group’s resulting exposure, it may consolidate the SPE on to the Group’s balance sheet. The consolidation of SPEs isconsidered at inception, based on the arrangements in place and the assessed risk exposures at that time. In accordance with IFRS, SPEs are consolidatedwhen the substance of the relationship between the Group and the entity indicates control. Potential indicators of control include, amongst others, anassessment of the Group’s exposure to the risks and benefits of the SPE. The initial consolidation analysis is revisited at a later date if:

(i) the Group acquires additional interests in the entity;

(ii) the contractual arrangements of the entity are amended such that the relative exposures to risks and rewards change; or

(iii) the Group acquires control over the main operating and financial decisions of the entity.

A number of the Group’s transactions have recourse only to the assets of unconsolidated SPEs. Typically, the majority of the exposure to these assets isborne by third parties and the Group’s risk is mitigated through over-collateralisation, unwind features and other protective measures.

The business activities within the Group where SPEs are used include multi-seller conduit programmes, asset securitisations, client intermediation, creditstructuring, asset realisations and fund management. These activities are described below. In addition, later sections provide quantative information on theGroup’s involvements with CDOs,SIVs SIV-Lites and conduits.

Multi-seller conduit programmesBarclays creates, administers and provides liquidity and credit enhancements to several commercial paper conduit programmes, primarily in the UnitedStates. These conduits provide clients access to liquidity in the commercial paper markets by allowing them to sell consumer or trade receivables to theconduit, which then issues commercial paper to investors to fund the purchase. The conduits have sufficient collateral, credit enhancements and liquiditysupport to maintain an investment grade rating for the commercial paper.

Asset securitisationsThe Group has assisted its customers with the formation of asset securitisations, some of which are effected through the use of SPEs. These entities haveminimal equity and rely on funding in the form of notes to purchase the assets for securitisation. As these SPEs are created for other companies, the Groupdoes not usually control these entities and therefore does not consolidate them. The Group may provide financing in the form of senior notes or junior notesand may also provide derivatives to the SPE. These transactions are included on the balance sheet.

The Group has also used SPEs to securitise part of its originated and purchased retail and commercial lending portfolios and credit card receivables. TheseSPEs are usually consolidated and de-recognition only occurs when the Group transfers its contractual right to receive cash flows from the financial assets,or retains the contractual rights to receive the cash flows, but assumes a contractual obligation to pay the cash flows to another party without material delayor reinvestment, and also transfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk. Thecarrying amount of securitised assets together with the associated liabilities are set out in Note 29.

Client intermediationThe Group has structured transactions as a financial intermediary to meet investor and client needs. These transactions involve entities structured by eitherthe Group or the client and they are used to modify cash flows of third party assets to create investments with specific risk or return profiles or to assistclients in the efficient management of other risks. Such transactions will typically result in a derivative being shown on the balance sheet, representing theGroup’s exposure to the relevant asset. The Group also invests in lessor entities specifically to acquire assets for leasing. Client intermediation also includesarrangements to fund the purchase or construction of specific assets (most common in the property industry).


45 Off balance sheet arrangements continuedCredit structuringThe Group structures investments to provide specific risk profiles to investors. This may involve the sale of credit exposures, often by way of derivatives, to anentity which subsequently funds those exposures by issuing securities. These securities may initially be held by Barclays prior to sale outside of the Group.

Asset realisationsThe Group establishes SPEs to facilitate the recovery of loans in circumstances where the borrower has suffered financial loss.

To the extent that there are guarantees and commitments in relation to SPEs the details are included in Note 34 Contingent liabilities and commitments.

Collateralised debt obligations (CDOs)The Group has structured and underwritten CDOs. At inception, the Group's exposure principally takes the form of a liquidity facility provided to supportfuture funding difficulties or cash shortfalls in the vehicles. If required by the vehicle, the facility is drawn with the amount advanced included within loansand advances on the balance sheet. Upon an event of default or other triggering event, the Group may acquire control of a CDO and, therefore, be requiredto fully consolidate the vehicle for accounting purposes. The potential for transactions to hit default triggers before the end of 2010 has been assessed andis included in the determination of £714m impairment charges and other credit provisions in relation to ABS CDO Super Senior and other credit marketexposures for the year ended 31st December 2009.

The Group’s exposure to ABS CDO Super Senior positions before hedging was £1,931m as at 31st December 2009, equivalent to an aggregate 50.83%decline in value on average for all investors. This represents the Group's exposure to High Grade CDOs, stated net of write-downs and charges. Thesefacilities are fully drawn and included within loans and advances on the balance sheet.

CollateralThe collateral underlying unconsolidated CDOs comprised 78% residential mortgage backed securities, 3% non-residential asset backed securities and19% in other categories (a proportion of which will be backed by residential mortgage collateral).

The remaining Weighted Average Life (WAL) of all collateral is 5.9 years. The combined Net Asset Value (NAV) for all of the CDOs was £0.9bn.

FundingThe CDOs were funded with senior unrated notes and rated notes up to AAA. The capital structure senior to the AAA notes on cash CDOs was supported bya liquidity facility provided by the Group. The senior portion covered by liquidity facilities is on average 88% of the capital structure.

The initial WAL of the notes in issue averaged 6.7 years. The full contractual maturity is 38.2 years.

Interests in third party CDOsThe Group has purchased securities in and entered into derivative instruments with third party CDOs. These interests are held as trading assets or liabilitieson the Group's balance sheet and measured at fair value. The Group has not provided liquidity facilities or similar agreements to third party CDOs.

Structured investment vehicles (SIVs)The Group does not structure or manage SIVs. Group exposure to third party SIVs comprised:

– £16m (2008: £52m) of senior liquidity facilities.

– Derivative exposures included on the balance sheet at their net fair value of £53m (2008: £273m).

SIV-LitesThe Group has exposure to two SIV-Lite transactions. The Group is not involved in their ongoing management. Exposures have decreased to £461m (2008: £638m) representing drawn liquidity facilities of £106m and assets designated at fair value of £355m.

Commercial paper and medium-term note conduitsThe Group provided £16bn in undrawn backstop liquidity facilities to its own sponsored CP conduits. The Group fully consolidates these entities such thatthe underlying assets are reflected on the Group balance sheet.

These consolidated entities in turn provide facilities of £753m to third party conduits containing prime UK buy-to-let RMBS. As at 31st December 2009, theentire facility had been drawn and is included in available for sale financial investments.

The Group provided backstop facilities to support the paper issued by four third party conduits. These facilities totalled £287m, with underlying collateralcomprising 100% auto loans. Drawings on these facilities were £125m as at 31st December 2009 and are included within loans and advances tocustomers.

The Group provided backstop facilities to four third party SPEs that fund themselves with medium-term notes. These notes are sold to investors as a seriesof 12 month securities and remarketed to investors annually. If investors decline to renew their holdings at a price below a pre-agreed spread, the backstopfacility requires the Group to purchase the outstanding notes at scheduled maturity. The Group has provided facilities of £1.6bn to SPEs holding prime UKand Australian owner-occupied Residential Mortgage Back Securities (RMBS) assets. As at the balance sheet date these facilities had been drawn and wereincluded in loans and advances.



46 Financial risksFinancial risk managementThere are no differences in the manner in which financial risks are managed and measured between the Barclays Bank PLC Group and the Barclays PLCGroup. Therefore, the explanations of the management, the control responsibilities and the measurement described in this note and Notes 47, 48 and 49are those for the Barclays PLC Group, which includes the Barclays Bank PLC Group. The amounts included in these notes are those for Barclays Bank PLC.

The Group is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth managementand investment management services. Financial instruments are fundamental to the Group’s business and managing financial risks, especially credit risk, isa fundamental part of its business activity.

The Group’s risk management policies and processes are designed to identify and analyse risk, to set appropriate risk appetite, limits, and controls, and tomonitor the risks and adherence to limits by means of reliable and up-to-date data. Risk management policies, models and systems are regularly reviewedto reflect changes to markets, products and best market practice.

Risk responsibilitiesThe Board approves risk appetite and the Board Risk Committee (BRC) monitors the Group’s risk profile against this appetite:

– The Chief Risk Officer, under delegated authority from the Group Chief Executive and Group Finance Director, has responsibility for ensuring effective riskmanagement and control;

– Business Heads are responsible for the identification and management of risk in their businesses;

– Business risk teams, each under the management of a Business Risk Director, are responsible for assisting Business Heads in the identification andmanagement of their business risk profiles for implementing appropriate controls. These risk management teams also assist Group Risk in theformulation of Group Risk policy and the implementation of it across the businesses;

– Within Group Risk, Risk-Type Heads and their teams are responsible for establishing a risk control framework and risk oversight; and

– Internal Audit is responsible for the independent review of risk management and the control environment.

Oversight of risk management is exercised by the Group Risk Oversight Committee which is chaired by the Chief Risk Officer under authority delegatedby the Group Finance Director. The Group Risk Oversight Committee oversees management of the Group’s risk profile, exercised through the setting, reviewand challenge of the size and constitution of the profile when viewed against the Group risk appetite.

The Executive Committee monitors and manages risk-adjusted performance of businesses and receives a regular update on forward risk trends and theGroup Risk Profile Report.

The BRC reviews the Group risk profile, approves the Group Control Framework and approves minimum control requirements for principal risks.

The Board Audit Committee (BAC) considers the adequacy and effectiveness of the Group Control Framework and receives quarterly reports on controlissues of significance and half-yearly reports on impairment allowances and regulatory reports.

Both BRC and BAC also receive reports dealing in more depth with specific issues relevant at the time. The proceedings of both Committees are reported tothe full Board. The Board approves the overall Group risk appetite.

The Group Risk Oversight Committee is chaired by the Chief Risk Officer and oversees the management of the Group’s risk profile and all of its significantrisks. Oversight is exercised through the setting, review and challenge of the size and constitution of the profile when viewed against the Group’s riskappetite. It has delegated and apportioned responsibility for credit risk management to the Retail and Wholesale Credit Risk Management Committees.

The main financial risks affecting the Group are discussed in Notes 47 to 49.


47 Credit riskCredit risk is the risk of suffering financial loss, should any of the Group’s customers, clients or market counterparties fail to fulfil their contractual obligationsto the Group. Credit risk arises mainly from commercial and consumer loans and advances, credit cards, and loan commitments arising from such lendingactivities, but can also arise from credit enhancement provided, such as financial guarantees, letters of credit, endorsements and acceptances.

The Group is also exposed to other credit risks arising from investments in debt securities and other exposures arising from its trading activities (‘trading exposures’) including, non-equity trading portfolio assets, derivatives as well as settlement balances with market counterparties and reverserepurchase loans.

Losses arising from exposures held for trading (derivatives, debt securities) are accounted for as trading losses, rather than impairment charges, eventhough the fall in value causing the loss may be attributable to credit deterioration.

Maximum exposure to credit risk before collateral held or other credit enhancements The following table presents the maximum exposure at 31st December 2009 and 2008 to credit risk of balance sheet and off-balance sheet financialinstruments, before taking account of any collateral held or other credit enhancements and after allowance for impairment and netting where appropriate.

For financial assets recognised on the balance sheet, the exposure to credit risk equals their carrying amount. For financial guarantees granted, the maximumexposure to credit risk is the maximum amount that Barclays would have to pay if the guarantees were to be called upon. For loan commitments and other creditrelated commitments that are irrevocable over the life of the respective facilities, the maximum exposure to credit risk is the full amount of the committed facilities.

This analysis and all subsequent analyses of credit risk include only financial assets subject to credit risk. They exclude other financial assets, mainly equitysecurities held in trading portfolio or available for sale as well as non-financial assets. The nominal value of off-balance sheet credit related instruments arealso shown, where appropriate.

Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts have not been included as the Group isnot exposed to credit risk on these assets. Credit losses in these portfolios, if any, would lead to a reduction in the linked liabilities and result in no direct lossto the Group.

Whilst the Group’s maximum exposure to credit risk is the carrying value of the assets or, in the case of off-balance sheet items, the amount guaranteed, committed,accepted or endorsed, in most cases the likely exposure is far less due to collateral, credit enhancements and other actions taken to mitigate the Group’s exposure.



47 Credit risk continuedA description of the credit risk management and measurement methodologies, the credit quality of the assets and the collateral and other creditenhancements held against them is included in the relevant sections within this Note, for each of the categories in the following table:

At 31st December 2009 ReverseLoans and Debt repurchaseadvances securities Derivatives agreements Others Total

£m £m £m £m £m £m

The GroupOn-balance sheet:

Cash and balances at central banks 81,483 81,483

Items in course of collection from other banks 1,593 1,593

Trading portfolio:Treasury and other eligible bills 9,926 9,926Debt securities 116,594 116,594Traded loans 2,962 2,962

Total trading portfolio 2,962 126,520 129,482

Financial assets designated at fair value held on own account:Loans and advances 22,390 22,390Debt securities 4,007 4,007Other financial assets 557 7,757 344 8,658

Total financial assets designated at fair value held on own account 22,947 4,007 7,757 344 35,055

Derivative financial instruments 416,815 416,815

Loans and advances to banks 41,135 41,135

Loans and advances to customers:Residential mortgage loans 149,099 149,099Credit card receivables 21,889 21,889Other personal lending 25,435 25,435Wholesale and corporate loans and advances 212,928 212,928Finance lease receivables 10,873 10,873

Total loans and advances to customers 420,224 420,224

Available for sale financial investments:Treasury and other eligible bills 5,919 5,919Debt securities 43,888 43,888

Total available for sale financial investments 49,807 49,807

Reverse repurchase agreements 143,431 143,431Other assets 3,476 3,476

Total on-balance sheet 487,268 180,334 416,815 151,188 86,896 1,322,501

Off-balance sheet:Acceptances and endorsements 375Guarantees and letters of credit pledged as collateral security and securities lending arrangements 42,812Commitments 207,275

Total off-balance sheet 250,462

Total maximum exposure 1,572,963


47 Credit risk continued


£m £m £m £m £m £m

The BankOn-balance sheet:





Financial assets designated at fair value held on own account:Loans and advances 21,636 21,636Debt securities 3,338 3,338Other financial assets 423 2,083 99 2,605




Loans and advances to customers:Residential mortgage loans 110,605 110,605Credit card receivables 11,523 11,523Other personal lending 14,125 14,125Wholesale and corporate loans and advances 375,513 375,513Finance lease receivables 362 362






Off-balance sheet:Acceptances and endorsements 350Guarantees and letters of credit pledged as collateral security andsecurities lending arrangements 40,556Commitments 159,816







£m £m £m £m £m £m

The GroupOn-balance sheet:





Financial assets designated at fair value held on own account:Loans and advances 30,057 130 30,187Debt securities 8,628 8,628Other financial assets 1,469 7,283 479 9,231




Loans and advances to customers:Residential mortgage loans 139,845 139,845Credit card receivables 22,304 22,304Other personal lending 27,270 27,270Wholesale and corporate loans and advances 259,699 259,699Finance lease receivables 12,697 12,697






Off-balance sheet:Acceptances and endorsements 585Guarantees and letters of credit pledged as collateral securityand securities lending arrangements 53,942Commitments 260,816






£m £m £m £m £m £m

The BankOn-balance sheet:



Trading portfolio:Treasury and other eligible bills 425 425Debt securities 102,923 102,923Traded loans 1,047 1,047


Financial assets designated at fair value held on own account:Loans and advances 24,596 24,596Debt securities 7,801 7,801Other financial assets 1,472 217 1,689

Total financial assets designated at fair value held on own account 26,068 7,801 217 34,086

Derivative financial instruments 1,003,685 1,003,685


Loans and advances to customers:Residential mortgage loans 107,663 107,663Credit card receivables 11,511 11,511Other personal lending 18,289 18,289Wholesale and corporate loans and advances 416,082 416,082Finance lease receivables 344 344


Available for sale financial investments:Treasury and other eligible bills 380 380Debt securities 57,061 57,061



Total on-balance sheet 618,828 168,590 1,003,685 128,815 28,818 1,948,736

Off-balance sheet:Acceptances and endorsements 546Guarantees and letters of credit pledged as collateral securityand securities lending arrangements 51,615Commitments 189,081





47 Credit risk continuedCredit risk concentrationsA concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics that wouldcause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

The analyses of credit risk concentrations presented below are based on the location of the counterparty or customer or the industry in which they are engaged.

Credit risk concentrations by geographical sector 2009

Other Rest ofUnited European United the

Kingdom Union States Africa World Total£m £m £m £m £m £m

The GroupOn-balance sheet:Cash and balances at central banks 37,697 5,584 32,279 1,742 4,181 81,483Items in the course of collection from other banks 1,340 56 – 196 1 1,593Trading portfolio 12,232 35,088 52,229 1,414 28,519 129,482Financial assets designated at fair value held on own account 13,945 3,986 10,800 2,352 3,972 35,055Derivative financial instruments 133,713 128,881 111,269 2,511 40,441 416,815Loans and advances to banks 5,117 12,697 13,137 2,388 7,796 41,135Loans and advances to customers 203,582 84,343 58,355 47,495 26,449 420,224Available for sale financial investments 16,752 14,028 7,175 4,993 6,859 49,807Reverse repurchase agreements 22,222 44,014 60,759 527 15,909 143,431Other assets 1,565 417 651 661 182 3,476


Off-balance sheet:Acceptances and endorsements 134 5 – 26 210 375Guarantees and letters of credit pledged as collateral security and securities lending arrangements 3,337 2,783 32,849 1,795 2,048 42,812Commitments 95,120 26,344 57,598 19,480 8,733 207,275

Total off-balance sheet 98,591 29,132 90,447 21,301 10,991 250,462

Total 546,756 358,226 437,101 85,580 145,300 1,572,963

The BankOn-balance sheet:Cash and balances at central banks 37,619 4,983 31,690 54 4,101 78,447Items in the course of collection from other banks 1,339 25 – 8 1 1,373Trading portfolio 11,808 34,614 17,687 161 22,355 86,625Financial assets designated at fair value held on own account 17,208 3,931 2,939 151 3,350 27,579Derivative financial instruments 151,461 130,841 107,394 908 39,291 429,895Loans and advances to banks 7,927 12,828 14,109 789 7,310 42,963Loans and advances to customers 375,761 61,909 47,520 3,654 23,284 512,128Available for sale financial investments 17,085 9,738 4,505 254 4,402 35,984Reverse repurchase agreements 26,661 44,778 60,993 9 12,992 145,433Other assets 1,036 11 72 1 78 1,198


Off-balance sheet:Acceptances and endorsements 134 5 – 1 210 350Guarantees and letters of credit pledged as collateral securityand securities lending arrangements 3,271 2,380 32,851 7 2,047 40,556Commitments 87,766 21,890 41,773 417 7,970 159,816

Total off-balance sheet 91,171 24,275 74,624 425 10,227 200,722

Total 739,076 327,933 361,533 6,414 127,391 1,562,347


47 Credit risk continued.

Credit risk concentrations by geographical sector 2008

Other Rest ofUnited European United the

Kingdom Union States Africa World Total£m £m £m £m £m £m

The Group:On-balance sheet:Cash and balances at central banks 8,406 11,039 8,381 1,712 481 30,019Items in the course of collection from other banks 1,447 59 – 169 20 1,695Trading portfolio 23,865 35,396 66,084 2,770 26,185 154,300Financial assets designated at fair value held on own account 14,158 7,388 19,738 2,904 3,858 48,046Derivative financial instruments 317,621 215,054 366,161 4,403 81,563 984,802Loans and advances to banks 7,524 12,591 13,616 2,189 11,787 47,707Loans and advances to customers 213,079 91,109 75,826 44,373 37,428 461,815Available for sale financial investments 15,423 18,928 16,583 3,351 8,549 62,834Reverse repurchase agreements 22,659 41,724 47,034 848 18,089 130,354Other assets 1,198 548 550 520 280 3,096


Off-balance sheet:Acceptances and endorsements 274 – 6 41 264 585Guarantees and letters of credit pledged as collateral security and securities lending arrangements 4,433 3,742 42,227 1,738 1,802 53,942Commitments 103,548 32,445 90,298 23,210 11,315 260,816

Total off-balance sheet 108,255 36,187 132,531 24,989 13,381 315,343

Total 733,635 470,023 746,504 88,228 201,621 2,240,011

The BankOn-balance sheet:Cash and balances at central banks 8,295 8,067 8,011 66 428 24,867Items in the course of collection from other banks 1,404 32 – 10 20 1,466Trading portfolio 20,912 34,382 29,303 132 19,666 104,395Financial assets designated at fair value held on own account 16,205 7,147 6,620 143 3,971 34,086Derivative financial instruments 343,493 215,749 363,801 625 80,017 1,003,685Loans and advances to banks 5,685 10,752 9,686 1,032 10,669 37,824Loans and advances to customers 392,153 66,326 59,971 2,987 32,452 553,889Available for sale financial investments 14,472 23,274 14,231 158 5,306 57,441Reverse repurchase agreements 24,545 39,511 49,447 10 15,302 128,815Other assets 1,149 967 99 2 51 2,268


Off-balance sheet:Acceptances and endorsements 273 – 6 2 265 546Guarantees and letters of credit pledged as collateral securityand securities lending arrangements 4,363 3,218 42,227 4 1,803 51,615Commitments 95,823 26,345 54,351 872 11,690 189,081

Total off-balance sheet 100,459 29,563 96,584 878 13,758 241,242

Total 928,772 435,770 637,753 6,043 181,640 2,189,978




Credit risk concentrations by industrial sector 2009

Transport,Postal and Agriculture,communi- Manufac-cation and turing and Con-

Government Business Wholesale struction Energy Residential Other Financeand Central Financial and other and retail and and mortgage personal lease

Banks Services services trade Property water loans lending receivables Total£m £m £m £m £m £m £m £m £m £m

The GroupOn-balance sheet:Cash and balances at central banks 81,483 – – – – – – – – 81,483Items in the course of collection from other banks 7 1,586 – – – – – – – 1,593Trading portfolio assets 76,454 41,482 2,811 4,536 1,063 3,136 – – – 129,482Financial assets designated at fair value held on own account 5,435 13,366 2,893 948 11,929 330 150 4 – 35,055Derivative financial instruments 6,119 379,901 8,424 7,805 2,416 12,081 – 69 – 416,815Loans and advances to banks 4,425 36,710 – – – – – – – 41,135Loans and advances to customers 4,800 93,370 40,034 41,645 29,175 10,727 149,099 40,501 10,873 420,224Available for sale financial investments 16,320 30,398 1,962 377 269 57 416 – 8 49,807Reverse repurchase agreements 5,347 136,184 608 366 926 – – – – 143,431Other assets 414 1,588 543 64 60 13 106 682 6 3,476

Total on-balance sheet 200,804 734,585 57,275 55,741 45,838 26,344 149,771 41,256 10,887 1,322,501

Off-balance sheet:Acceptances and endorsements – 85 95 155 2 33 – 5 – 375Guarantees and letters of credit pledged as collateral security and securities lending arrangements – 33,117 2,805 2,308 715 2,872 584 411 – 42,812Commitments 1,687 39,806 18,670 28,552 10,647 13,502 15,356 79,055 – 207,275

Total off-balance sheet 1,687 73,008 21,570 31,015 11,364 16,407 15,940 79,471 – 250,462

Total 202,491 807,593 78,845 86,756 57,202 42,751 165,711 120,727 10,887 1,572,963

The BankOn-balance sheet:Cash and balances at central banks 78,447 – – – – – – – – 78,447Items in the course of collection from other banks – 1,373 – – – – – – – 1,373Trading portfolio assets 58,375 20,065 2,001 2,889 605 2,690 – – – 86,625Financial assets designated at fair value held on own account 4,806 9,611 2,433 515 10,077 113 24 – – 27,579Derivative financial instruments 5,983 393,237 8,590 7,729 2,415 11,925 – 16 – 429,895Loans and advances to banks 2,776 40,187 – – – – – – – 42,963Loans and advances to customers 4,748 272,970 32,019 35,738 20,683 9,706 110,605 25,297 362 512,128Available for sale financial investments 8,928 25,688 352 377 167 3 469 – – 35,984Reverse repurchase agreements 5,009 139,505 546 366 7 – – – – 145,433Other assets 31 414 233 20 13 – – 487 – 1,198

Total on-balance sheet 169,103 903,050 46,174 47,634 33,967 24,437 111,098 25,800 362 1,361,625

Off-balance sheet:Acceptances and endorsements – 63 94 153 2 33 – 5 – 350Guarantees and letters of credit pledged as collateral securityand securities lending arrangements – 32,470 2,521 2,018 596 2,822 – 129 – 40,556Commitments 1,687 30,162 20,147 27,467 9,311 13,115 13,377 44,550 – 159,816


Total 170,790 965,745 68,936 72,272 43,876 40,407 124,475 70,484 362 1,562,347







The Group:On-balance sheet:Cash and balances at central banks 30,019 – – – – – – – – 30,019Items in the course of collection from other banks 10 1,685 – – – – – – – 1,695Trading portfolio assets 68,962 73,729 3,320 2,590 1,404 4,272 – 4 19 154,300Financial assets designated at fair value held on own account 5,871 21,860 1,080 1,286 17,415 271 – 263 – 48,046Derivative financial instruments 10,370 928,793 9,265 14,420 3,779 18,054 – 121 – 984,802Loans and advances to banks 2,794 44,913 – – – – – – – 47,707Loans and advances to customers 5,296 112,506 52,243 49,068 29,988 14,078 139,845 46,094 12,697 461,815Available for sale financial investments 14,891 44,865 1,288 436 333 354 569 98 – 62,834Reverse repurchase agreements 17,939 110,645 536 428 806 – – – – 130,354Other assets 103 1,397 602 260 8 12 155 554 5 3,096

Total on-balance sheet 156,255 1,340,393 68,334 68,488 53,733 37,041 140,569 47,134 12,721 1,924,668

Off-balance sheet:Acceptances and endorsements – 151 180 231 14 3 – 6 – 585Guarantees and letters of credit pledged as collateral security and securities lending arrangements – 44,858 4,161 2,275 778 1,604 – 266 – 53,942Commitments 5,096 33,746 32,769 36,815 11,405 16,279 12,196 112,510 – 260,816


Total 161,351 1,419,148 105,444 107,809 65,930 54,927 152,765 159,916 12,721 2,240,011








The Bank:On-balance sheet:Cash and balances at central banks 24,867 – – – – – – – – 24,867Items in the course of collection from other banks – 1,466 – – – – – – – 1,466Trading portfolio assets 48,966 47,013 2,292 1,466 1,200 3,455 – 3 – 104,395Financial assets designated at fair value held on own account 5,086 15,265 411 554 12,770 – – – – 34,086Derivative financial instruments 10,058 948,380 9,014 14,420 3,778 18,031 – 4 – 1,003,685Loans and advances to banks 1,539 36,285 – – – – – – – 37,824Loans and advances to customers 5,104 294,628 41,970 43,601 20,653 13,377 107,663 26,549 344 553,889Available for sale financial investments 10,567 44,563 951 378 267 123 568 24 – 57,441Reverse repurchase agreements 1,021 127,110 256 428 – – – – – 128,815Other assets 1 805 961 206 2 4 13 276 – 2,268

Total on-balance sheet 107,209 1,515,515 55,855 61,053 38,670 34,990 108,244 26,856 344 1,948,736

Off-balance sheet:Acceptances and endorsements – 151 149 223 14 3 – 6 – 546Guarantees and letters of credit pledged as collateral security and securities lending arrangements – 44,558 2,750 2,042 580 1,551 – 134 – 51,615Commitments 5,096 45,693 24,392 32,972 10,133 15,577 11,835 43,383 – 189,081


Total 112,305 1,605,917 83,146 96,290 49,397 52,121 120,079 70,379 344 2,189,978


47 Credit risk continuedLoans and advances Credit risk management Governance and responsibilities The credit risk management teams in each business are accountable to the Business Risk Directors in those businesses who, in turn, report to the heads oftheir businesses and also to the Chief Risk Officer.

The credit risk function provides Group-wide direction of credit risk-taking. The teams within this function manage the resolution of all significant creditpolicy issues and run the Credit Committee, which approves major credit decisions. Each business segment has an embedded credit risk managementteam. These teams assist Group Risk in the formulation of Group Risk policy and its implementation across the businesses.

The principal committees that review credit risk management, formulate overall Group credit policy and resolve all significant credit policy issues are theBoard Risk Committee, the Group Risk Oversight Committee, the Wholesale Credit Risk Management Committee and the Retail Credit Risk ManagementCommittee.

The Wholesale Credit Risk Management Committee (WCRMC) oversees wholesale exposures, comprising lending to businesses, banks and other financialinstitutions. The WCRMC monitors exposure by country, industry sector, individual large exposures and exposures to sub-investment grade countries.

The Retail Credit Risk Management Committee (RCRMC) oversees exposures, which comprise unsecured personal lending (including small businesses),mortgages and credit cards. The RCRMC monitors the risk profile and performance of the retail portfolios by receipt of key risk measures and indicators atan individual portfolio level, ensuring mitigating actions taken to address performance are appropriate and timely. Metrics reviewed will consider portfoliocomposition and both an overall stock and new flow level.

The monthly Wholesale and Retail Credit Risk Management Committees exercise oversight through review and challenge of the size and constitution of theportfolios when viewed against Group Risk Appetite for wholesale and retail credit risks. They are chaired by the Wholesale and Retail Credit Risk Directors.

Credit monitoringWholesale and corporate loans which are deemed to contain heightened levels of risk are recorded on early-warning or watch lists. These lists are graded inline with the perceived severity of the risk attached to the lending and its probability of default. The lists are updated on a monthly basis and are closelymonitored.

Regardless of whether they are recorded on early-warning or watch lists, all wholesale and corporate loans are subject to a full review of all facilities on, at least, an annual basis. More frequent interim reviews may be undertaken should circumstances dictate.

Retail loans (which tend to comprise homogeneous assets) are monitored on a portfolio basis.

Credit risk measurement Barclays uses statistical modelling techniques throughout its business in its credit rating systems. They enable a coherent approach to risk measurementacross all credit exposures, retail and wholesale. The key building blocks in the measurement system are the probability of customer default (PD), exposurein the event of default (EAD), and severity of loss-given-default (LGD). The models are reviewed regularly to monitor their robustness relative to actualperformance and amended as necessary to optimise their effectiveness.

For wholesale and corporate lending, Barclays assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating.Barclays credit rating contains 21 grades, representing the Group’s best estimate of credit risk for a counterparty based on current economic conditions.Retail customers are not all assigned internal risk ratings in this way for account management purposes, therefore their probability of default is considered.

The Group considers Credit Risk Loans (defined as all customers overdue by 90 days or more, and/or individually impaired or restructured) and loan lossrates when assessing the credit performance of its loan portfolios, other than those held at fair value. For the purposes of historical and business unitcomparison, loan loss rates are defined as total annualised credit impairment charge (excluding available for sale assets and reverse repurchase agreements)divided by gross loans and advances to customers and banks (at amortised cost).

Credit risk mitigation Where appropriate, the Group takes action to mitigate credit risk such as reducing amounts outstanding (in discussion with the customers, clients orcounterparties if appropriate), using credit derivatives, securitising assets, and disposals.

Diversification to avoid unwanted credit risk concentrations is achieved through setting maximum exposure guidelines to individual counterparties.Excesses are reported to the Board Risk Committee and the Group Risk Oversight Committee. Mandate and scale limits are used to limit the stock of currentexposures in a loan portfolio and the flow of new exposures into a loan portfolio. Limits are typically based on the tenor and nature of the lending.

Collateral and security The Group routinely obtains collateral and security to mitigate credit risk.

The Group ensures that any collateral held is sufficiently liquid, legally effective, enforceable and regularly reassessed. Before attaching value to collateral,businesses holding specific, agreed classes of collateral must ensure that they are holding a correctly perfected charge.

Before reliance is placed on third party protection in the form of bank, government or corporate guarantees or credit derivative protection from financialintermediary counterparties, a credit assessment is undertaken.

Security structures and legal covenants are subject to regular review, at least annually, to ensure that they remain fit for purpose and remain consistent withaccepted local market practice.



47 Credit risk continuedAll loans and advances are categorised as either:

– neither past due nor individually impaired;

– past due but not individually impaired; or

– individually impaired, which includes restructured loans.

The impairment allowance includes allowances against financial assets that have been individually impaired and those subject to collective impairment.

Credit risk loans comprise loans and advances to banks and customers 90 days overdue or more and those subject to individual impairment. The coverageratio is calculated by reference to the total impairment allowance and the carrying value (before impairment) of credit risk loans.

As at 31st December 2009 Neither past Past due due nor but not Total

individually individually Individually Impairment carrying Credit Risk Coverageimpaireda impairedb impaired Total allowance value Loans ratio

£m £m £m £m £m £m £m %

The GroupTrading portfolio:Traded loans 2,962 – – 2,962 – 2,962 – –Financial assets designated at fair value held on own account:Loans and advances 22,210 180 – 22,390 – 22,390 – –Other financial assets 557 – – 557 – 557 – –Loans and advances to banks 38,859 2,280 57 41,196 (61) 41,135 57 100.0Loans and advances to customers:Residential mortgage loans 139,199 8,846 1,693 149,738 (639) 149,009 3,604 17.7Credit card receivables 20,195 1,544 2,459 24,198 (2,309) 21,889 3,068 75.3Other personal lending 23,796 2,175 2,372 28,343 (2,908) 25,435 3,466 83.9Wholesale and corporate loans and advances 199,800 7,598 10,088 217,486 (4,558) 212,928 11,497 39.6Finance lease receivables 10,128 664 402 11,194 (321) 10,873 696 46.1

Total 457,706 23,287 17,071 498,064 (10,796) 487,268 22,388 48.2

The BankTrading portfolio:Traded loans 2,945 – – 2,945 – 2,945 – –Financial assets designated at fair value held on own account:Loans and advances 21,467 169 – 21,636 – 21,636 – –Other financial assets 423 – – 423 – 423 – –Loans and advances to banks 40,784 2,183 57 43,024 (61) 42,963 57 100.0Loans and advances to customers:Residential mortgage loans 104,037 5,900 816 110,753 (148) 110,605 1,532 9.7Credit card receivables 10,920 582 1,363 12,865 (1,342) 11,523 1,578 85.0Other personal lending 13,043 1,030 1,959 16,032 (1,907) 14,125 2,485 76.7Wholesale and corporate loans and advances 365,778 3,854 9,825 379,457 (3,944) 375,513 10,584 37.3Finance lease receivables 362 – – 362 – 362 – –

Total 559,759 13,718 14,020 587,497 (7,402) 580,095 16,236 45.6

Notesa Financial assets subject to collective impairment allowance are included in this column

if they are not past due.b Financial assets subject to collective impairment allowance are included in this column

if they are past due.



As at 31st December 2008

Neither past Past due due nor but not Total

individually individually Individually Impairment carrying Credit Risk Coverageimpaireda impairedb impaired Total allowance value Loans ratio

£m £m £m £m £m £m £m %

The GroupTrading portfolio:Traded loans 1,070 – – 1,070 – 1,070 – –Financial assets designated at fair value held on own account:Loans and advances 29,182 875 – 30,057 – 30,057 – –Other financial assets 1,469 – – 1,469 – 1,469 – –Loans and advances to banks 46,665 1,045 48 47,758 (51) 47,707 48 100.0Loans and advances to customers:cResidential mortgage loans 131,017 7,481 1,668 140,166 (321) 139,845 2,528 12.7Credit card receivables 21,092 1,426 1,231 23,749 (1,445) 22,304 1,990 72.6Other personal lending 25,885 1,274 1,980 29,139 (1,869) 27,270 2,560 73.0Wholesale and corporate loans and advances 246,505 8,307 7,586 262,398 (2,699) 259,699 8,277 32.6Finance lease receivables 12,367 285 234 12,886 (189) 12,697 297 63.6

Total 515,252 20,693 12,747 548,692 (6,574) 542,118 15,700 41.9

The BankTrading portfolio:Traded loans 1,047 – – 1,047 – 1,047 – –Financial assets designated at fair value held on own account:Loans and advances 23,783 813 – 24,596 – 24,596 – –Other financial assets 1,472 – – 1,472 – 1,472 – –Loans and advances to banks 36,778 1,049 48 37,875 (51) 37,824 48 100.0Loans and advances to customers:cResidential mortgage loans 100,426 6,822 506 107,754 (91) 107,663 1,141 8.0Credit card receivables 10,783 811 818 12,412 (901) 11,511 1,127 79.9Other personal lending 17,451 715 1,355 19,521 (1,232) 18,289 1,705 72.3Wholesale and corporate loans and advances 407,329 4,159 7,593 419,081 (2,999) 416,082 8,044 37.3Finance lease receivables 344 – – 344 – 344 – –

Total 599,413 14,369 10,320 624,102 (5,274) 618,828 12,065 43.7

Notesa Financial assets subject to collective impairment allowance are included in this column

if they are not past due.b Financial assets subject to collective impairment allowance are included in this column

if they are past due.c Loans and advances to customers in the above table have been reanalysed between

Residential mortgage loans and Other personal lending.



47 Credit risk continuedCredit quality of loans and advances neither past due nor individually impaired

2009 2008

Strong Satisfactory Higher risk Total Strong Satisfactory Higher risk Total£m £m £m £m £m £m £m £m

The GroupTrading portfolio:Traded loans 1,366 1,290 306 2,962 759 220 91 1,070Financial assets designated at fair value held on own account:Loans and advances 15,909 3,809 2,492 22,210 25,665 2,792 725 29,182Other financial assets 261 – 296 557 – 1,469 – 1,469Loans and advances to banks 35,825 2,492 542 38,859 40,181 6,384 100 46,665Loans and advances to customers:Residential mortgage loans 66,956 69,919 2,324 139,199 86,937 42,770 1,310 131,017Credit card receivables – 20,038 157 20,195 – 20,426 666 21,092Other personal lending 3,417 18,108 2,271 23,796 2,975 21,750 1,160 25,885Wholesale and corporate loans and advances 119,764 70,132 9,904 199,800 141,868 94,453 10,184 246,505Finance lease receivables 2,664 7,082 382 10,128 4,214 7,504 649 12,367

Total loans and advances 246,162 192,870 18,674 457,706 302,599 197,768 14,885 515,252

The BankTrading portfolio:Traded loans 1,366 1,273 306 2,945 759 220 68 1,047Financial assets designated at fair value held on own account:Loans and advances 17,657 2,892 918 21,467 21,211 1,518 1,054 23,783Other financial assets 423 – – 423 – 1,472 – 1,472Loans and advances to banks 37,160 1,851 1,773 40,784 34,708 1,981 89 36,778Loans and advances to customers:Residential mortgage loans 60,025 42,964 1,048 104,037 83,139 17,182 105 100,426Credit card receivables – 10,920 – 10,920 – 10,783 – 10,783Other personal lending 2,911 8,178 1,954 13,043 4,838 11,656 957 17,451Wholesale and corporate loans and advances 303,545 54,510 7,723 365,778 329,384 68,385 9,560 407,329Finance lease receivables – 362 – 362 2 342 – 344

Total loans and advances 423,087 122,950 13,722 559,759 474,041 113,539 11,833 599,413

For the purposes of the analysis of credit quality, the following internal measures of credit quality have been used:

Retail lending Wholesale lending

Financial statements description Probability of default Probability of default Default grade

Strong 0.0-0.60% 0.0-0.05% 1-30.05-0.15% 4-50.15-0.30% 6-80.30-0.60% 9-11

Satisfactory 0.60-10.00% 0.60-2.15% 12-142.15-11.35% 15-19

Higher risk 10.00% + 11.35% + 20-21

Financial statement descriptions can be summarised as follows:

Strong – there is a very high likelihood that the asset being recovered in full.

Satisfactory – whilst there is a high likelihood that the asset will be recovered and therefore, of no cause for concern to the Group, the asset may not becollateralised, or may relate to retail facilities, such as credit card balances and unsecured loans, which have been classified as satisfactory, regardless of thefact that the output of internal grading models may have indicated a higher classification. At the lower end of this grade there are customers that are beingmore carefully monitored, for example corporate customers, which are indicating some evidence of some deterioration, mortgages with a high loan to valueratio, and unsecured retail loans operating outside normal product guidelines.

Higher risk – there is concern over the obligor’s ability to make payments when due. However, these have not yet converted to actual delinquency. Theremay also be doubts over value of collateral or security provided. However, the borrower or counterparty is continuing to make payments when due and isexpected to settle all outstanding amounts of principal and interest.


47 Credit risk continuedLoans and advances that are past due but not individually impaired An age analysis of loans and advances that are past due but not individually impaired is set out below.

For the purposes of this analysis an asset is considered past due and included below when any payment due under strict contractual terms is received lateor missed. The amount included is the entire financial asset, not just the payment, of principal or interest or both, overdue.

The table below provides a breakdown of total financial assets past due but not individually impaired. In general, retail and wholesale loans fall into thiscategory for two separate reasons. Retail loans and advances to customers may come under this category because the impairment allowance on such loansis calculated on a collective – not individual – basis. This reflects the homogenous nature of the assets, which allows statistical techniques to be used, ratherthan individual assessment.

In contrast, some loans to wholesale and corporate customers and banks may come under this category because of instances where a payment on a loan ispast due without requiring an individual impairment allowance. For example, an individual impairment allowance will not be required when a loss is notexpected due to a corporate loan being fully secured or collateralised. As a result, it is past due but not individually impaired.

As at 31st December 2009 Past due Past due Past due Past due Past due Of whichup to 1 1-2 2-3 3-6 6 months Creditmonth months months months and over Total Risk Loans

£m £m £m £m £m £m £m

The GroupFinancial assets designated at fair value held on own account:Loans and advances 170 – 1 – 9 180 –

Loans and advances to banks 2,280 – – – – 2,280 –

Loans and advances to customers:Residential mortgage loans 4,849 1,453 633 1,410 501 8,846 1,911Credit card receivables 501 214 220 459 150 1,544 609Other personal lending 369 295 417 413 681 2,175 1,094Wholesale and corporate loans and advances 5,403 292 494 866 543 7,598 1,409Finance lease receivables 186 86 98 282 12 664 294

Total loans and advances to customers 11,308 2,340 1,862 3,430 1,887 20,827 5,317

Total financial assets past due but not individually impaired 13,758 2,340 1,863 3,430 1,896 23,287 5,317

The BankFinancial assets designated at fair value held on own account:Loans and advances 169 – – – – 169 –


Loans and advances to customers:Residential mortgage loans 3,648 1,183 353 546 170 5,900 716Credit card receivables 209 67 91 207 8 582 215Other personal lending 87 185 232 290 236 1,030 526Wholesale and corporate loans and advances 2,629 161 305 377 382 3,854 759Finance lease receivables – – – – – – –

Total loans and advances to customers 6,573 1,596 981 1,420 796 11,366 2,216

Total financial assets past due but not individually impaired 8,925 1,596 981 1,420 796 13,718 2,216




2008

Past due Past due Past due Past due Past due Of whichup to 1 1-2 2-3 3-6 6 months Creditmonth months months months and over Total Risk Loans

£m £m £m £m £m £m £m

The GroupFinancial assets designated at fair value held on own account:Loans and advances 315 147 81 82 250 875 –

Loans and advances to banks 1,044 1 – – – 1,045 –

Loans and advances to customers:Residential mortgage loans 4,421 1,570 630 713 147 7,481 860Credit card receivables 293 224 150 291 468 1,426 759Other personal lending 219 202 273 338 242 1,274 580Wholesale and corporate loans and advances 6,229 540 847 477 214 8,307 691Finance lease receivables 130 53 39 63 – 285 63

Total loans and advances to customers 11,292 2,589 1,939 1,882 1,071 18,773 2,953

Total financial assets past due but not individually impaired 12,651 2,737 2,020 1,964 1,321 20,693 2,953

The BankFinancial assets designated at fair value held on own account:Loans and advances 313 147 80 77 196 813 –


Loans and advances to customers:Residential mortgage loans 4,177 1,478 532 553 82 6,822 635Credit card receivables 213 168 121 122 187 811 309Other personal lending 58 120 187 149 201 715 350Wholesale and corporate loans and advances 3,275 211 222 246 205 4,159 451Finance lease receivables – – – – – – –

Total loans and advances to customers 7,723 1,977 1,062 1,070 675 12,507 1,745

Total financial assets past due but not individually impaired 9,085 2,124 1,142 1,147 871 14,369 1,745


47 Credit risk continuedLoans and advances individually assessed as impairedAn analysis of financial assets individually assessed as impaired is as follows:

2009 2008

Original Revised Original Revisedcarrying Impairment carrying carrying Impairment carryingamount allowance amount amount allowance amount

£m £m £m £m £m £m

The GroupLoans and advances to banks individually impaired 57 (49) 8 48 (44) 4

Loans and advances to customers:Residential mortgage loans 1,693 (317) 1,376 1,668 (240) 1,428Credit card receivables 2,459 (1,690) 769 1,231 (727) 504Other personal lending 2,372 (1,531) 841 1,980 (1,237) 743Wholesale and corporate loans and advances 10,088 (3,837) 6,251 7,586 (2,310) 5,276Finance lease receivables 402 (233) 169 234 (140) 94

Total loans and advances individually impaired 17,071 (7,657) 9,414 12,747 (4,698) 8,049

Collective impairment allowance (3,139) (1,876)

Total impairment allowance (10,796) (6,574)

The BankLoans and advances to banks individually impaired 57 (49) 8 48 (44) 4

Loans and advances to customers:Residential mortgage loans 816 (92) 724 506 (64) 442Credit card receivables 1,363 (826) 537 818 (489) 329Other personal lending 1,959 (1,331) 628 1,355 (868) 487Wholesale and corporate loans and advances 9,825 (3,323) 6,502 7,593 (2,746) 4,847Finance lease receivables – – – – – –

Total loans and advances individually impaired 14,020 (5,621) 8,399 10,320 (4,211) 6,109

Collective impairment allowance (1,781) (1,063)

Total impairment allowance (7,402) (5,274)



47 Credit risk continuedThe movements on the impairment allowance during the year were as follows:

2009

At Acquisitions Unwind Exchange Amounts Amounts Balancebeginning and of and other written charged to at 31st

of year disposals discount adjustments off Recoveries profit December£m £m £m £m £m £m £m £m

The GroupLoans and advances to banks 51 – – (11) – 10 11 61

Loans and advances to customers:Residential mortgage loans 321 19 (59) 46 (82) 3 391 639Credit card receivables 1,445 415 (79) (28) (1,009) 78 1,487 2,309Other personal lending 1,869 – (26) (89) (633) 21 1,766 2,908Wholesale and corporate loans and advances 2,699 – (15) (48) (1,538) 28 3,432 4,558Finance lease receivables 189 – (6) 3 (118) 10 243 321

Total loans and advances to customers 6,523 434 (185) (116) (3,380) 140 7,319 10,735

Total impairment allowance 6,574 434 (185) (127) (3,380) 150 7,330 10,796

The BankLoans and advances to banks 51 – – (11) – 7 14 61

Loans and advances to customers:Residential mortgage loans 91 19 (2) 6 (18) – 52 148Credit card receivables 901 115 (79) 5 (336) 38 698 1,342Other personal lending 1,232 14 (28) (103) (397) 10 1,179 1,907Wholesale and corporate loans and advances 2,999 – – (867) (1,393) 25 3,180 3,944Finance lease receivables – – – – – – – –

Total loans and advances to customers 5,223 148 (109) (959) (2,144) 73 5,109 7,341

Total impairment allowance 5,274 148 (109) (970) (2,144) 80 5,123 7,402

2008

At Acquisitions Unwind Exchange Amounts Amounts Balancebeginning and of and other written charged to at 31st

of year disposals discount adjustments off Recoveries profit December£m £m £m £m £m £m £m £m

The GroupLoans and advances to banks 3 – – 1 – 7 40 51

Loans and advances to customers:Residential mortgage loans 137 – (35) 19 (44) 3 241 321Credit card receivables 841 306 (68) 94 (845) 69 1,048 1,445Other personal lending 1,368 1 (32) 134 (525) 42 881 1,869Wholesale and corporate loans and advances 1,310 – – 506 (1,428) 41 2,270 2,699Finance lease receivables 113 – – 37 (77) 12 104 189

Total loans and advances to customers 3,769 307 (135) 790 (2,919) 167 4,544 6,523

Total impairment allowance 3,772 307 (135) 791 (2,919) 174 4,584 6,574

The BankLoans and advances to banks 3 – – 1 – 5 42 51

Loans and advances to customers:Residential mortgage loans 56 – (1) 3 (6) 1 38 91Credit card receivables 733 – (68) 78 (526) 58 626 901Other personal lending 948 – (32) 98 (425) 24 619 1,232Wholesale and corporate loans and advances 1,028 – – 455 (529) 30 2,015 2,999Finance lease receivables 6 – – 2 – – (8) –

Total loans and advances to customers 2,771 – (101) 636 (1,486) 113 3,290 5,223

Total impairment allowance 2,774 – (101) 637 (1,486) 118 3,332 5,274



Loan Loss Rates Loans andGross advances

loans and Impairment net of Impairment Loan lossadvances allowance impairment charge rate

£m £m £m £m basis points

The GroupAs at 31st December 2009 472,155 (10,796) 461,359 7,358 156As at 31st December 2008 516,096 (6,574) 509,522 4,913 95

The BankAs at 31st December 2009 562,493 (7,402) 555,091 5,195 92As at 31st December 2008 596,987 (5,274) 591,713 3,656 61

Renegotiated loans and advancesLoans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstancesof the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers aconcessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue and will be individually impaired wherethe renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a newagreement, which is treated as a new loan.

Collateral and other credit enhancements held Financial assets that are past due or individually assessed as impaired may be partially or fully collateralised or subject to other forms of credit enhancement.

Assets in these categories subject to collateralisation are mainly corporate loans, residential mortgage loans and finance lease receivables. Credit cardreceivables and other personal lending are generally unsecured (although in some instances a charge over the borrowers property of other assets may be sought).

Corporate loansSecurity is usually taken in the form of a fixed charge over the borrower’s property or a floating charge over the assets of the borrower. Loan covenants maybe put in place to safeguard the Group’s financial position. If the exposure is sufficiently large, either individually or at the portfolio level, credit protection inthe form of guarantees, credit derivatives or insurance may be taken out.

For these and other reasons collateral given is only accurately valued on origination of the loan or in the course of enforcement actions and as a result it is notpracticable to estimate the fair value of the collateral held.

Residential mortgage loansThese are secured by a fixed charge over the property.

A description and the estimated fair value of collateral held in respect of residential mortgage loans that are past due or individually assessed as impaired is as follows:

Nature of assets The Group The Bank

2009 2008 2009 2008Fair value Fair value Fair value Fair value

£m £m £m £m

Residential property 9,628 7,264 6,255 6,282

Collateral included in the above table reflects the Group’s interest in the property in the event of default. That held in the form of charges against residentialproperty in the UK is restricted to the outstanding loan balance. In other territories, where the Group is not obliged to return any sale proceeds to themortgagee, the full estimated fair value has been included.

Finance lease receivablesThe net investment in the lease is secured through retention of legal title to the leased assets.

Collateral and other credit enhancements obtained The carrying value of assets held by the Group as at 31st December 2009 as a result of the enforcement of collateral was as follows:

Nature of assets The Group The Bank

2009 2008 2009 2008Carrying Carrying Carrying Carrying amount amount amount amount

£m £m £m £m

Residential property 71 171 22 20Commercial and industrial property 66 2 – 1Other credit enhancements 248 61 209 36

Total 385 234 231 57



47 Credit risk continuedAny properties repossessed are made available for sale in an orderly and timely fashion, with any proceeds realised being used to reduce or repay theoutstanding loan. For business customers, in some circumstances, where excess funds are available after repayment in full of the outstanding loan, they areoffered to any other, lower ranked, secured lenders. Any additional funds are returned to the customer. Barclays does not, as a rule, occupy repossessedproperties for its business use.

The Group does not use assets obtained in its operations. Assets obtained are normally sold, generally at auction, or realised in an orderly manner for themaximum benefit of the Group, the borrower and the borrower’s other creditors in accordance with the relevant insolvency regulations.

Debt securities Trading portfolio assets, financial assets designated at fair value and available for sale assets are measured on a fair value basis. The fair value will reflect,among other things, the credit risk of the issuer.

Most listed and some unlisted securities are rated by external rating agencies. The Group mainly uses external credit ratings provided by Standard & Poors’or Moody’s. Where such ratings are not available or are not current, the Group will use its own internal ratings for the securities.

An analysis of the credit quality of the Group’s debt securities is set out below:

2009 2008

AAA to BBB– AAA to BBB–(investment B- and (investment B– and

grade) BB+ to B below Total grade) BB+ to B below TotalThe Group £m £m £m £m £m £m £m £m

Trading portfolio: Treasury and other eligible bills 9,901 25 – 9,926 4,491 53 – 4,544Debt securities 109,237 5,321 2,036 116,594 141,454 5,556 1,676 148,686

Total trading portfolio 119,138 5,346 2,036 126,520 145,945 5,609 1,676 153,230

Financial assets designated at fair value held on own account: Debt securities 2,200 1,791 16 4,007 1,222 7,406 – 8,628

Available for sale financial investments: Treasury and other eligible bills 4,049 1,870 – 5,919 2,823 1,180 – 4,003Debt securities 40,184 3,185 519 43,888 55,817 2,347 667 58,831

Total available for sale financial investments 44,233 5,055 519 49,807 58,640 3,527 667 62,834

Total debt securities 165,571 12,192 2,571 180,334 205,807 16,542 2,343 224,692

% 91.8 6.8 1.4 100.0 91.6 7.4 1.0 100.0

Included in the above, there are impaired available for sale debt securities with a carrying value at 31st December 2009 of £265m (2008: £329m), after a write-down of £692m (2008: £363m).

2009 2008


grade) BB+ to B below Total grade) BB+ to B below TotalThe Bank £m £m £m £m £m £m £m £m

Trading portfolio: Treasury and other eligible bills 8,969 – – 8,969 383 42 – 425Debt securities 70,175 3,568 968 74,711 97,485 4,286 1,152 102,923

Total trading portfolio 79,144 3,568 968 83,680 97,868 4,328 1,152 103,348

Financial assets designated at fair value held on own account: Debt securities 1,901 1,422 15 3,338 – 7,801 – 7,801

Available for sale financial investments: Treasury and other eligible bills 839 254 – 1,093 222 158 – 380Debt securities 33,054 1,688 149 34,891 54,713 2,024 324 57,061

Total available for sale financial investments 33,893 1,942 149 35,984 54,935 2,182 324 57,441

Total debt securities 114,938 6,932 1,132 123,002 152,803 14,311 1,476 168,590

% 93.5 5.6 0.9 100.0 90.6 8.5 0.9 100.0

Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by specifically identified assetsthat would be obtainable in the event of default.


47 Credit risk continuedDerivatives Derivatives are measured on a fair value basis.

The credit quality of the Group’s derivative assets according to the credit quality of the counterparty at 31st December 2009 and 2008 was as follows:

2009 2008


grade) BB+ to B below Total grade) BB+ to B below Total£m £m £m £m £m £m £m £m

The GroupDerivatives 399,534 15,565 1,716 416,815 939,071 42,266 3,465 984,802

% 95.9 3.7 0.4 100.0 95.3 4.3 0.4 100.0

The BankDerivatives 413,816 14,366 1,713 429,895 957,206 43,020 3,459 1,003,685

% 96.3 3.3 0.4 100.0 95.4 4.3 0.3 100.0

Credit risk from derivatives is mitigated where possible through netting agreements whereby derivative assets and liabilities with the same counterpartycan be offset. Group policy requires all netting arrangements to be legally documented. The ISDA Master Agreement is the Group’s preferred agreement fordocumenting OTC derivatives. It provides the contractual framework within which dealing activities across a full range of OTC products are conducted andcontractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or other pre-determined events occur.

Collateral is obtained against derivative assets, depending on the creditworthiness of the counterparty and/or nature of the transaction. Any collateral takenin respect of OTC trading exposures will be subject to a ‘haircut’ which is negotiated at the time of signing the collateral agreement. A haircut is the valuationpercentage applicable to each type of collateral and will be largely based on liquidity and price volatility of the underlying security. The collateral obtained forderivatives is either cash, direct debt obligation government (G14+) bonds denominated in the domestic currency of the issuing country, debt issued bysupranationals or letters of credit issued by an institution with a long-term unsecured debt rating of A+/A3 or better. Where the Group has ISDA masteragreements, the collateral document will be the ISDA Credit Support Annex (CSA). The collateral document must give Barclays the power to realise anycollateral placed with it in the event of the failure of the counterparty, and to place further collateral when requested or in the event of insolvency,administration or similar processes, as well as in the case of early termination.

Derivative assets and liabilities would be £374bn (2008: £917bn) lower than reported if netting were permitted for assets and liabilities with the samecounterparty or for which the Group holds cash collateral.

Reverse repurchase agreementsReverse repurchase agreements and securities borrowing arrangements are collateralised loans typically of short maturities.

The loans are fully collateralised with highly liquid securities legally transferred to the Group.The level of collateral is monitored daily and further collateralcalled when required.

2009 2008

AAA to BBB– AAA to BBB–(investment B– and (investment B– and

grade) BB+ to B below Total grade) BB+ to B below Total£m £m £m £m £m £m £m £m

The GroupFinancial assets designated at fair value held on own account:Other financial assets 4,749 1,955 1,053 7,757 3,882 3,401 – 7,283Reverse repurchase agreements 136,366 6,674 391 143,431 122,188 6,101 2,065 130,354

Total reverse repurchase agreements 141,115 8,629 1,444 151,188 126,070 9,502 2,065 137,637

% 93.3 5.7 1.0 100.0 91.6 6.9 1.5 100.0

The BankFinancial assets designated at fair value held on own account:Other financial assets 1,890 73 120 2,083 – – – –Reverse repurchase agreements 140,739 4,391 303 145,433 122,987 3,938 1,890 128,815

Total reverse repurchase agreements 142,629 4,464 423 147,516 122,987 3,938 1,890 128,815

% 96.7 3.0 0.3 100.0 95.5 3.1 1.4 100.0

No reverse repurchase agreements held by the Group at 31st December 2009 or 2008 were individually impaired, however, during the year, the Groupwrote off £43m of reverse repurchase agreements (2008: £124m).



47 Credit risk continuedOther credit risk assetsThe Group’s other assets that are subject to credit risk are cash with central banks of £81,483m (2008: £30,019m), items in course of collection from otherbanks £1,593m (2008: £1,695m), other financial assets £3,476m (2008: £3,096m).

Cash and balances at central banksSubstantially all balances are held with central banks. There is limited credit risk in relation to balances at central banks.

Items in the course of collection from other banksThere is limited credit risk in relation to items in the course of collection through the clearing system from other banks.

Other financial assetsOther financial assets comprise £3,476m (2008: £3,096m) of other assets and £344m (2008: £609m) of assets held at fair value.

Off-balance sheetThe Group applies fundamentally the same risk management policies for off-balance sheet risks as it does for its on-balance sheet risks. In the case ofcommittments to lend, customers and counterparties will be subject to the same credit management policies as for loans and advances. Collateral may besought depending on the strength of the counterparty and the nature of the transaction.

Credit market exposuresBarclays Capital’s credit market exposures primarily relate to US residential mortgages, commercial mortgages and leveraged finance businesses that havebeen significantly impacted by the continued deterioration in the global credit markets. The exposures include both significant positions subject to fair valuemovements in the profit and loss account and positions that are classified as loans and advances and available for sale.

The exposures are set out by asset class below:

As at As at31.12.09 31.12.08

£m £m

US Residential Mortgages

ABS CDO Super Senior 1,931 3,104Other US sub-prime and Alt-A 1,392 7,729Monoline wrapped US RMBS 6 1,639

Commercial mortgages

Commercial real estate loans and properties 7,734 11,578Commercial mortgage-backed securities 471 735Monoline wrapped CMBS 30 1,854

Other Credit Market Exposures

Leveraged finance a 5,507 9,048SIVs, SIV-Lites and CDPCs 553 1,113Monoline wrapped CLO and other 2,126 4,939

Total exposures 19,750 41,739

Loan to Protium 7,859 –

On 16th September 2009, Barclays Capital sold assets at £7,454m , including £5,087m in credit marked assets, to Protium Finance LP (Protium), a newlyestablished fund. As part of the transaction, Barclays extended a £7,669m 10 year loan to Protium Finance LP. At 31st December 2009, this loan had acarrying value of £7,859m (including accrued interest).

Notea This is a change in presentation from 31st December 2008, which reflected certain loan

facilities originated post 1st July 2007.


48 Market Risk Market risk managementMarket risk is the risk that the Group’s earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level orvolatility of market rates or prices such as interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. The majority of marketrisk exposure resides in Barclays Capital. Barclays is also exposed to market risk through interest rate risk on its non-trading activities and through the pension fund.

Organisation and structureThe Board approves market risk appetite for trading and non-trading activities. The Market Risk Director is responsible for the Market Risk ControlFramework and, under delegated authority from the Chief Risk Officer, sets a limit framework within the context of the approved market risk appetite. Adaily market risk report summarises Barclays market risk exposures against agreed limits. This daily report is sent to the Chief Risk Officer, the Market RiskDirector, the Group Finance Director and the appropriate Business Risk Directors.

The head of each business, assisted by the business risk management team, is accountable for all market risks associated with its activities. Each business isresponsible for the identification, measurement, management, control and reporting of market risk as outlined in Barclays Market Risk Control Framework.Oversight and support is provided to the business by the Market Risk Director, assisted by the Group Market Risk team. The Market Risk Committee reviews, approves, and makes recommendations concerning the market risk profile across Barclays including risk appetite, limits and utilisation. TheCommittee meets monthly and is chaired by the Market Risk Director. Attendees include the Chief Risk Officer, respective business risk managers andGroup Market Risk.

Traded market riskBarclays policy is to concentrate trading activities in Barclays Capital. This includes transactions where Barclays Capital acts as principal with clients or withthe market. For maximum efficiency, client and market activities are managed together.

Risk measurement and controlThe measurement techniques used to measure and control traded market risk include Daily Value at Risk (DVaR), Expected Shortfall, average of the threeworst hypothetical losses from the DVaR simulation (3W), Global Asset Class stress testing and Global Scenario stress testing.

DVaR is an estimate of the potential loss arising from unfavourable market movements, if the current positions were to be held unchanged for one businessday. Barclays Capital uses the historical simulation methodology with a two-year unweighted historical period at the 95% confidence level.

The historical simulation calculation can be split into three parts:

– Calculate hypothetical daily profit or loss for each position over the most recent two years, using observed daily market moves.

– Sum all hypothetical profit or losses for day one across all positions, giving one total profit or loss. Repeat for all other days in the two-year history.

– DVaR is the 95th percentile selected from the two years of daily hypothetical total profit or loss.

The DVaR model has been approved by the FSA to calculate regulatory capital for the trading book. The approval covers general market risk in interest rate,foreign exchange, commodities and equity products, and issuer specific risk for the majority of single name and portfolio traded credit products.

DVaR is an important market risk measurement and control tool and consequently the model is regularly assessed. The main approach employed is thetechnique known as back-testing which counts the number of days when a loss (as defined by the FSA), exceeds the corresponding DVaR estimate,measured at the 99% confidence level.

The FSA categorises a DVaR model as green, amber or red. A green model is consistent with a good working DVaR model and is achieved for models thathave four or less back-testing exceptions in a 12-month period. For Barclays Capital’s trading book, green model status was maintained for 2009 and 2008.

Expected Shortfall is the average of all hypothetical losses from the historical simulation beyond DVaR. To improve the control framework, formal monitoringof 3W (average of the three worst observations from the DVaR historical simulation) was started in the first half of 2009.

Stress testing provides an indication of the potential size of losses that could arise in extreme conditions. Global Asset Class stress testing has beendesigned to cover major asset classes including interest rate, credit spread, commodity, equity and foreign exchange rates. They are based on past stressmoves in respective asset class prices and rates. Global Scenario stress testing is based on hypothetical events which could lead to extreme yet plausiblestress type moves, under which profitability is seriously challenged.

Market Risk is controlled through the use of limits where appropriate on the above risk measures. Limits are set at the total Barclays Capital level, risk factorlevel such as interest rate risk, and business line level. Book limits such as foreign exchange and interest rate sensitivity limits are also in place.



48 Market risk continuedAnalysis of traded market risk exposuresBarclays Capital's market risk exposure, as measured by average total DVaR, increased by 45% to £77m (2008: £53m). The rise was mainly due to volatilityconsiderations, increased interest rate and credit spread exposure, and the Lehman Brothers North America businesses acquisition. Volatility impactedaverage DVaR because 2008’s extreme volatility impacted DVaR throughout 2009 but only impacted 2008 DVaR in the last four months of 2008.

Expected shortfall and 3W averaged £121m and £209m respectively representing increases of £51m (73%) and £93m (80%) compared to 2008.

The daily average, maximum and minimum values of DVaR, Expected Shortfall and 3W were calculated as below.

12 months to 12 months to31st December 2009 31st December 2008

Average Higha Lowa Average Higha Lowa

£m £m £m £m £m £m

DVaR (95%)Interest rate risk 44 83 23 29 48 15Credit spread risk 58 102 35 31 72 15Commodity risk 14 20 11 18 25 13Equity risk 13 27 5 9 21 5Foreign exchange risk 8 15 3 6 13 2Diversification effect a (60) n/a n/a (40) n/a n/a

Total DVaR 77 119 50 53 95 36

Expected shortfall 121 188 88 70 146 41

3W 209 301 148 116 282 61

The BankBarclays Capital’s market risk exposure, as measured by average total DVaR of 95%, increased by 46% to £76m (2008: £52m). The high for the year was£118m (2008: £93m) and the low for the year was £49m (2008: £34m).

Non-trading interest rate riskNon-traded interest rate risk arises from the provision of retail and wholesale (non-traded) banking products and services.

Barclays objective is to minimise non-traded risk. This is achieved by transferring risk from the business to a local treasury or Group Treasury, who in turnhedge the net exposure with the external market. Limits exist to ensure no material risk is retained within any business or product area. The majority of non-trading interest rate market exposures are within Global Retail and Commercial Banking, and Group Treasury. Trading activity is not permitted outsideBarclays Capital.

Risk measurement and controlThe risk in each business is measured and controlled using both an income metric (Annual Earnings at Risk) and a present value metric (Daily Value at Riskor stress testing). In addition scenario stress analysis is carried out by the business and reviewed by senior management and business-level asset andliability committees, when required.

Annual Earnings at Risk (AEaR) measures the sensitivity of net interest income (NII) over the next 12 months. It is calculated as the difference between theestimated income using the current yield curve and the lowest estimated income following a 100 basis points increase or decrease in interest rates, subjectto a minimum interest rate of 0%. Balances are adjusted for an assumed behavioural profile. This includes the treatment of non-maturity deposits.

Daily Value at Risk and stress testing is calculated using a Barclays Capital consistent approach. Both these metrics are calculated by each respectivebusiness area with oversight provided by Group Market Risk.

Risk exposures are monitored by respective business risk managers with oversight provided by Group Market Risk. The main business limits are approvedby Market Risk Committee. Book limits such as foreign exchange and interest rate sensitivity limits are also in place where appropriate.

To further improve the market risk control framework, Group Market Risk initiated an ongoing program of conformance visits to non-traded Treasuryoperations. These visits review both the current market risk profile and potential market risk developments, as well as verifying conformance with Barclayspolicies and standards as detailed in the market risk control framework.

Notea The high (and low) DVaR figures reported for each category did not necessarily occur on the

same day as the high (and low) DVaR reported as a whole. Consequently a diversificationeffect number for the high (and low) DVaR figures would not be meaningful and it istherefore omitted from the above table.


48 Market risk continuedAnalysis of Net Interest Income sensitivityThe tables below show the pre-tax net interest income sensitivity for the non-trading financial assets and financial liabilities held at 31st December 2009.The sensitivity has been measured using AEaR methodology as described above. The benchmark interest rate for each currency is set as at 31st December2009. The figures include the effect of hedging instruments but exclude exposures held or issued by Barclays Capital as these are measured and managedusing DVaR.

Net interest income sensitivity(AEaR) by currency +100 basis –100 basis +100 basis –100 basispoints points points points2009 2009 2008 2008

The Group £m £m £m £m

GBP 30 (360) 3 (273)USD (43) 14 (25) 7EUR (34) – (34) 30ZAR 29 (27) 13 (13)Others (1) 4 – (8)

Total (19) (369) (43) (257)

As percentage of net interest income (0.16%) (3.16%) (0.38%) (2.25%)

Non-traded interest rate risk, as measured by AEaR, was £369m in 2009, an increase of £112m compared to 2008. This estimate takes into account therates in place as at 31st December 2009. The increase mainly reflects the reduced spread generated on retail and commercial banking liabilities in the lowerinterest rate environment. If the interest rate hedges had not been in place then the AEaR risk for 2009 would have been £704m (2008: £670m).

DVaR is also used to control market risk in Global Retail and Commercial Banking – Western Europe, and in Group Treasury. The indicative average DVaRs for2009 are £1.4m (2008: £1.3m) for Western Europe and £1.0m (2008: £0.6m) for Group Treasury.

+100 basis –100 basis +100 basis –100 basispoints points points points2009 2009 2008 2008

The Bank £m £m £m £m

GBP 16 (186) 1 (108)USD (22) 7 (10) 3EUR (18) – (13) 12ZAR 15 (14) 5 (5)Others (1) 2 – (3)

Total (10) (191) (17) (101)

As percentage of net interest income (0.16%) (3.10%) (0.25%) (1.49%)

Note: This table excludes exposures held or issued by Barclays Capital as these are measured and managed using DVaR.



48 Market risk continuedAnalysis of Equity sensitivity

+100 basis –100 basis +100 basis –100 basispoints points points points2009 2009 2008 2008

£m £m £m £m

The GroupNet interest income (19) (369) (43) (257)Taxation effects on the above 4 85 6 33

Effect on profit for the year (15) (284) (37) (224)

As percentage of net profit after tax (0.15%) (2.76%) (0.71%) (4.27%)

Effect on profit for the year (per above) (15) (284) (37) (224)Available for sale reserve (527) 527 (806) 806Cash flow hedging reserve (929) 957 (473) 474Taxation effects on the above 335 (341) 166 (166)

Effect on equity (1,136) 859 (1,150) 890

As a percentage of equity (1.94%) 1.46% (2.64%) 2.04%

The BankNet interest income (10) (191) (17) (101)Taxation effects on the above – (4) 1 3

Effect on profit for the year (10) (195) (16) (98)

As percentage of net profit after tax (0.10%) (1.91%) (0.26%) (1.59%)

Effect on profit for year (per above) (10) (195) (16) (98)Available for sale reserve (334) 334 (621) 621Cashflow hedging reserve (798) 826 (357) 358Taxation effects on the above (24) 25 29 (29)

Effect on equity (1,166) 990 (965) 852

As a percentage of equity (2.44%) 2.07% (2.85%) 2.51%

Foreign exchange riskThe Group is exposed to two sources of foreign exchange risk.

(a) Transactional foreign currency exposureTransactional foreign exchange exposures represent exposure on banking assets and liabilities, denominated in currencies other than the functionalcurrency of the transacting entity.

The Group’s risk management policies prevent the holding of significant open positions in foreign currencies outside the trading portfolio managed byBarclays Capital which is monitored through DVaR.

There were no material net transactional foreign currency exposures outside the trading portfolio at either 31st December 2009 or 2008. Due to the low level of non-trading exposures no reasonably possible change in foreign exchange rates would have a material effect on either the Group’s profit or movements in equity for the year ended 31st December 2009 or 2008.

(b) Translational foreign exchange exposureThe Group’s translational foreign currency exposure arises from both its capital resources (including investments in subsidiaries and branches, intangibleassets, non-controlling interests, deductions from capital and debt capital instruments) and risk weighted assets (RWAs) being denominated in foreigncurrencies. Changes in foreign exchange rates result in changes in the Sterling equivalent value of foreign currency denominated capital resources and riskweighted assets. As a result, the Group’s regulatory capital ratios are sensitive to foreign exchange rate movements.

The Group’s capital ratio hedge strategy is to minimise the volatility of the capital ratios caused by foreign exchange rate movements. To achieve this, theGroup aims to maintain the ratio of foreign currency Core Tier 1, Tier 1 and Total Capital resources to foreign currency RWAs the same as the Group’s capitalratios.

The Group’s foreign currency capital resources include investments in subsidiaries and branches, intangible assets, non-controlling interests, deductionsfrom capital and debt capital instruments.

The Group’s investments in foreign currency subsidiaries and branches create capital resources denominated in foreign currencies. Changes in the Sterlingvalue of the investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in Core Tier 1 capital.


48 Market risk continuedDuring 2009, structural currency exposures net of hedging instruments increased from £6.4bn to £12.5bn primarily as a result of US Dollar hedgingdecisions taken in accordance with the Group’s capital ratio hedge strategy for foreign exchange rate movements.

To create foreign currency Tier 1 and Total Capital resources additional to the Core Tier 1 capital resources, the Group issues, where possible, debt capital innon sterling currencies. This is primarily achieved by the issuance of debt capital from Barclays Bank PLC, but can also be achieved by subsidiaries issuingcapital in local currencies.

The carrying value of the Group’s foreign currency net investments in subsidiaries and branches and the foreign currency borrowings and derivatives usedto hedge them as at 31st December 2009 were as follows:

Functional currency of the operation involved StructuralForeign Borrowings Derivatives currency Remaining

currency which hedge which hedge exposures structuralnet the net the net pre economic Economic currency

investments investments investments hedges hedges exposures£m £m £m £m £m £m

At 31st December 2009United States Dollar 16,677 3,205 – 13,472 6,056 7,416Euro 6,772 3,418 – 3,354 2,902 452Rand 4,055 – 1,542 2,513 189 2,324Japanese Yen 4,436 3,484 940 12 – 12Swiss Franc 2,840 2,734 92 14 – 14Other 2,983 – 677 2,306 – 2,306

Total 37,763 12,841 3,251 21,671 9,147 12,524

At 31st December 2008United States Dollar 14,577 6,019 – 8,558 6,720 1,838Euro 6,336 2,922 – 3,414 3,125 289Rand 3,725 – 1,306 2,419 164 2,255Japanese Yen 5,009 801 4,212 (4) – (4)Swiss Franc 3,042 2,936 101 5 – 5Other 2,940 – 880 2,060 – 2,060

Total 35,629 12,678 6,499 16,452 10,009 6,443

The economic hedges represent the US Dollar and Euro Preference Shares and Reserve Capital Instruments in issue that are treated as equity under IFRS,and do not qualify as hedges for accounting purposes.

The impact of a change in the exchange rate between Sterling and any of the major currencies would be:

– A higher or lower Sterling equivalent value of non-Sterling denominated capital resources and risk weighted assets. This includes a higher or lowercurrency translation reserve within equity, representing the retranslation of non-Sterling subsidiaries, branches and associated undertakings net of theimpact of foreign exchange rate changes on derivatives and borrowings designated as hedges of net investments.

– A higher or lower profit after tax, arising from changes in the exchange rates used to translate items in the consolidated income statement.

– A higher or lower value of available for sale investments denominated in foreign currencies, impacting the available for sale reserve.



49 Liquidity riskLiquidity managementLiquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of a sudden, and potentially protracted, increase in netcash outflows. Such outflows would deplete available cash resources for client lending, trading activities, investments and deposits. In extremecircumstances lack of liquidity could result in reductions in balance sheet and sales of assets, or potentially an inability to fulfil lending commitments. Therisk that it will be unable to do so is inherent in all banking operations and can be affected by a range of institution-specific and market-wide events.

Organisation and structureBarclays Treasury operates a centralised governance and control process that covers all of the Group’s liquidity risk management activities. Businesses assistBarclays Treasury in policy formation and limit setting by providing relevant and expert input for their local markets and customers.

Execution of the Group’s liquidity risk management strategy is carried out at country level within agreed policies, controls and limits, with the CountryTreasurer providing reports directly to Barclays Treasury to evidence conformance with the agreed risk profile. Liquidity risk is a standing agenda item atCountry and Cluster Asset and Liability Committees and on a consolidated basis is reported to the Group’s Treasury Committee.

The objective of the Group’s liquidity risk management strategy is to ensure that the funding profile of individual businesses and the Group as a whole isappropriate to underlying market conditions and the profile of our business in each given country. Liquidity risk limits and controls are flexed to achieve thatprofile and are based on regular qualitative and quantitative assessments of conditions under both normal and stressed conditions. Businesses are onlyallowed to have funding exposure to wholesale markets where they can demonstrate that their market is sufficiently deep and liquid and then only relativeto the size and complexity of their business.

Liquidity limits reflect both local regulatory requirements as well as the behavioural characteristics of their balance sheets. Breaches of limits are reported toTreasury Committee together with details of the requirements to return to compliance.

Liquidity risk frameworkBarclays has a comprehensive Liquidity Risk Management Framework (the Liquidity Framework) for managing the Group’s liquidity risk. The objective ofthe Liquidity Framework is for the Group to have sufficient liquidity to continue to operate for at least the minimum period specified by the FSA in the eventthat the wholesale funding markets are neither open to Barclays nor to the market as a whole. Many of the stress tests currently applied under the LiquidityFramework will also be applied under the FSA’s new regime, although the precise calibration may differ in Barclays final Individual Liquidity Guidance to beset by the FSA. The Framework considers a range of possible wholesale and retail factors leading to loss of financing including:

– Maturing of wholesale liabilities;

– Loss of secured financing and widened haircuts on remaining book;

– Retail and commercial outflows from savings and deposit accounts;

– Drawdown of loans and commitments;

– Potential impact of a 2 notch ratings downgrade; and

– Withdrawal of initial margin amounts by counterparties.

These stressed scenarios are used to assess the appropriate level for the Group’s liquidity pool, which comprises unencumbered assets and cash. Barclaysregularly uses these assets to access secured funding markets, thereby testing the liquidity assumptions underlying pool composition. The Group does notpresume the availability of central bank facilities to monetise the liquidity pool in any of the stress scenarios under the Liquidity Framework.

Liquidity PoolThe Group liquidity pool as at 31st December 2009 was £127bn gross (31st December 2008: £43bn) and comprised the following cash andunencumbered assets:

Composition of Group liquidity pool Cash and Governmentdeposits Government and Other

with central guaranteed supranational availablebanks bonds bonds liquidity Total

£bn £bn £bn £bn £bn

As at 31st December 2009 81 3 31 12 127As at 31st December 2008 a 30 – 2 11 43

The cost of maintaining the liquidity pool is a function of the source of funding for the buffer and the reinvestment spread.

Notea Previously disclosed as Barclays Capital only.


49 Liquidity risk continuedTerm FinancingRaising term funding is important in meeting the risk appetite of the Barclays Liquidity Framework. Barclays has continued to increase the term of issuedliabilities during 2009 by issuing:

– £15bn equivalent of public senior term funding

– £1.8bn equivalent of public covered bonds

– £21bn equivalent of structured notes

The Group has £4bn of publicly issued debt and £11bn of structured notes maturing in 2010.

Intraday liquidityThe need to monitor, manage and control intraday liquidity in real time is recognised by the Group as a critical process: any failure to meet specific intradaycommitments would have significant consequences, such as a visible market disruption.

The Group policy is that each operation must ensure that it has access to sufficient intraday liquidity to meet any obligations it may have to clearing andsettlement systems. Major currency payment flows and payment system collateral are monitored and managed in real time to ensure that at all times thereis sufficient collateral to make payments. In practice the Group maintains a significant buffer of surplus intraday liquidity to ensure that payments are madeon a timely basis. The Group actively engages in payment system development to help ensure that new payment systems are robust.

Day to day fundingDay to day funding is managed through limits on wholesale borrowings, secured borrowings and funding mismatches. These ensure that on any day andover any period there is a limited amount of refinancing requirement. These requirements include replenishment of funds as they mature or are borrowed bycustomers.

In addition to cash flow management, Treasury also monitors term mismatches between assets and liabilities, as well as the level and type of undrawnlending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.

Diversification of liquidity sourcesSources of liquidity are regularly reviewed to maintain a wide diversification by currency, geography, provider, product and term. In addition, to avoid relianceon a particular group of customers or market sectors, the distribution of sources and the maturity profile of deposits are also carefully managed. Importantfactors in assuring liquidity are competitive rates and the maintenance of depositors’ confidence. Such confidence is based on a number of factors includingthe Group’s reputation and relationship with those clients, the strength of earnings and the Group’s financial position.

Wholesale depositor split by counterparty type – Barclays Capital Other Othercentral financial

Banks Corporates Governments banks institutions Total% % % % % %

As at 31st December 2009 36 15 2 16 31 100As at 31st December 2008 32 15 11 9 33 100

Wholesale depositor split by geography – Barclays Capital Rest ofUS UK Other EU Japan Africa World Total% % % % % % %

As at 31st December 2009 9 25 23 3 16 24 100As at 31st December 2008 13 22 16 9 17 23 100

Funding StructureGlobal Retail and Commercial Banking, Barclays Wealth and Head Office Functions are structured to be self-funded through customer deposits and Barclaysequity and other long term capital. The Barclays Capital and Absa businesses are funded through the wholesale secured and unsecured funding markets.

The ratio of customer loans to customer deposits and long term funding has improved to 81% at 31st December 2009, from 93% at 31st December 2008.



49 Liquidity risk continuedGlobal Retail and Commercial Banking, Barclays Wealth and Head Office FunctionsAn important source of structural liquidity is provided by our core retail deposits in the UK, Europe and Africa; mainly current accounts and savings accounts.Although contractually current accounts are repayable on demand and savings accounts at short notice, the Group’s broad base of customers – numericallyand by depositor type – helps to protect against unexpected fluctuations. Such accounts form a stable funding base for the Group’s operations and liquidityneeds.

Group policy is to ensure that the assets of the retail, wealth and corporate bank, together with Head Office functions, on a global basis, do not exceedcustomer deposits and subordinated funding so that these businesses place no reliance on wholesale markets. The exception to this policy is Absa, whichhas a large portion of wholesale funding due to the structure of the South African financial sector.

In order to assess liquidity risk, the balance sheet is modelled to reflect behavioural experience in both assets and liabilities and is managed to maintain acash surplus. The maturity profile, excluding Absa, resulting from this behavioural modelling is set out below. This shows that there is a funding surplus of£94.5bn, and that there are expected outflows of £10.2bn within one year from asset repayments being less than liability attrition. For subsequent years theexpected repayments on assets are larger than the roll off of liabilities resulting in cash inflows. Maturities of net liabilities are, therefore, behaviourallyexpected to occur after five years.

Behavioural maturity profile of assets and liabilitiesa Cash inflow/(outflow)

Over Over Over Over1 year 2 years 3 years 4 years

Not but not but not but not but notFunding more than more than more than more than more than Oversurplus 1 year 2 years 3 years 4 years 5 years 5 years

£bn £bn £bn £bn £bn £bn £bn

As at 31st December 2009 94.5 (10.2) 17.8 21.2 7.8 1.8 (132.9)

Barclays CapitalBarclays Capital manages its liquidity to be primarily funded through wholesale sources, managing access to liquidity to ensure that potential cash outflowsin a stressed environment are covered.

73% of the inventory is funded on a secured basis (31st December 2008: 50%). Additionally, much of the short term funding is invested in highly liquidassets and central bank cash and therefore contributes towards the Group liquidity pool.

Barclays Capital undertakes secured funding in the repo markets based on liquidity characteristics. Limits are in place for each security asset class reflectingliquidity in the cash and financing markets for these assets. The percentage of secured funding using each asset class as collateral is set out below:

Secured funding by asset class Government Agency MBS ABS Corporate Equity Other% % % % % % %

As at 31st December 2009 59 7 7 6 10 8 3As at 31st December 2008 49 9 11 9 15 4 3

Unsecured wholesale funding for the Group (excluding Absa) is managed by Barclays Capital within specific term limits. Excluding short term deposits thatare included within the Group’s liquidity pool, the term of unsecured liabilities has been extended, with average life improving from at least 14b months at31st December 2008 to at least 26 months at 31st December 2009.

Contractual maturity of unsecured liabilitiesb Not more Not more Not more Not more Not more(Net of assets available from the Group liquidity pool) than than than than than Over

1 month 2 months 3 months 6 months 1 year 1 year% % % % % %

As at 31.12.09 – – – – 19 81

The extension of the term of the wholesale financing has meant that, as at 31st December 2009, 81% of net wholesale funding had remaining maturity ofgreater than 1 year and, as at the same date, there was no net wholesale unsecured re-financing required within six months.

Notesa In accordance with IFRS 7, prior year figures have not been provided as these measures

have not previously been reported on a comparable basis.b The 31st December 2008 average unsecured liability term has been restated to at least

14 months to reflect refinements in the underlying calculation.


49 Liquidity risk continuedContractual maturity of financial assets and liabilitiesDetails of contractual maturities for assets and liabilities form an important source of information for the management of liquidity risk. Such information isused (amongst other things) as the basis for modelling a behavioural balance sheet, for input into the liquidity framework, as discussed above.

The table below provides detail on the contractual maturity of all financial instruments and other assets and liabilities. Derivatives (other than thosedesignated in a hedging relationship) and trading portfolio assets and liabilities are included in the on demand column at their fair value. Liquidity risk onthese items is not managed on the basis of contractual maturity since they are not held for settlement according to such maturity and will frequently besettled before contractual maturity at fair value. Derivatives designated in a hedging relationship are included according to their contractual maturity.

Financial assets designated at fair value in respect of linked liabilities to customers under investment contracts have been included in Other assets andOther liabilities as the Group is not exposed to liquidity risk arising from them; any request for funds from creditors would be met by simultaneouslyliquidating or transferring the related investment.

At 31st December 2009 Over three Over Over Over Over

months six months one year three years five yearsNot more but not but not but not but not but not

On than three more than more than more than more than more than Overdemand months six months one year three years five years ten years ten years Total

The Group £m £m £m £m £m £m £m £m £m

AssetsCash and balances at central banks 80,592 891 – – – – – – 81,483Items in the course of collection from other banks 1,243 350 – – – – – – 1,593Trading portfolio assets 151,395 – – – – – – – 151,395Financial assets designated at fair value: – held on own account 679 10,795 1,679 2,456 5,514 3,998 2,293 13,897 41,311Derivative financial instruments:– held for trading 415,638 – – – – – – – 415,638– designated for risk management – 216 115 89 236 101 334 86 1,177Loans and advances to banks 5,114 30,385 314 1,787 2,396 544 98 497 41,135Loans and advances to customers 44,826 68,876 8,987 17,848 51,886 38,357 63,180 126,264 420,224Available for sale financial investments 1,157 6,999 8,356 3,434 20,530 6,039 6,802 3,334 56,651Reverse repurchase agreements and cash collateral onsecurities borrowed 248 129,095 3,558 5,604 4,680 31 210 5 143,431Other financial assets – 2,816 – – 660 – – – 3,476

Total financial assets 700,892 250,423 23,009 31,218 85,902 49,070 72,917 144,083 1,357,514

Other assets 21,634

Total assets 1,379,148

LiabilitiesDeposits from other banks 3,861 50,020 4,850 15,558 1,325 200 420 212 76,446Items in the course of collection due to other banks 1,373 93 – – – – – – 1,466Customer accounts 205,894 86,481 8,226 11,940 2,954 3,049 2,864 1,047 322,455Trading portfolio liabilities 51,252 – – – – – – – 51,252Financial liabilities designated at fair value:– held on own account 1,219 17,599 5,755 7,145 18,780 14,701 14,647 6,356 86,202Derivative financial instruments:– held for trading 402,019 – – – – – – – 402,019– designated for risk management – 186 68 37 111 433 394 168 1,397Debt securities in issue 64 43,390 17,761 19,408 29,904 11,607 7,838 5,930 135,902Repurchase agreements and cash collateral on securities lent 502 189,843 5,446 2,525 326 108 29 2 198,781Subordinated liabilities – 173 1 27 1,234 1,375 9,871 13,135 25,816Other financial liabilities – 4,959 – – 1,135 – – – 6,094

Total financial liabilities 666,184 392,744 42,107 56,640 55,769 31,473 36,063 26,850 1,307,830

Other liabilities 12,619

Total liabilities 1,320,449

Cumulative liquidity gap 34,708 (107,613) (126,711) (152,133) (122,000) (104,403) (67,549) 49,684 58,699



49 Liquidity risk continued




The Bank £m £m £m £m £m £m £m £m £m

AssetsCash and balances at central banks 77,674 773 – – – – – – 78,447Items in course of collection from other banks 1,248 125 – – – – – – 1,373Trading portfolio assets 93,806 – – – – – – – 93,806Financial assets designated at fair value:– held on own account – 3,838 840 1,564 2,841 2,635 2,263 13,664 27,645Derivative financial instruments:– held for trading 428,976 – – – – – – – 428,976– designated for risk management – 194 72 42 158 73 272 108 919Loans and advances to banks 2,818 24,456 548 4,201 5,746 620 2,331 2,243 42,963Loans and advances to customers 39,694 226,426 6,472 10,977 44,604 35,637 57,177 91,141 512,128Available for sale financial investments 24 3,194 5,879 2,124 13,218 3,353 5,392 3,390 36,574Reverse repurchase agreements and cash collateral on securities borrowed 17 135,677 2,144 3,179 4,184 29 198 5 145,433Other financial assets – 1,090 – – 108 – – – 1,198

Total financial assets 644,257 395,773 15,955 22,087 70,859 42,347 67,633 110,551 1,369,462

Other assets 29,966


LiabilitiesDeposits from other banks 14,251 52,537 5,143 14,700 2,575 125 497 425 90,253Items in the course of collection due to other banks 1,374 10 – – – – – – 1,384Customer accounts 162,323 245,996 6,036 12,223 10,874 3,139 2,183 1,745 444,519Trading portfolio liabilities 33,534 – – – – – – – 33,534Financial liabilities designated at fair value:– held on own account 1,146 16,805 5,692 6,767 18,071 14,454 14,341 6,270 83,546Derivative financial instruments:– held for trading 417,055 – – – – – – – 417,055– designated for risk management – 170 63 31 90 413 381 151 1,299Debt securities in issue – 21,775 12,059 12,287 20,608 8,043 6,378 991 82,141Repurchase agreements and cash collateral on securities lent – 156,450 5,550 2,435 326 108 324 2 165,195Subordinated liabilities – – – 27 1,100 792 9,693 13,281 24,893Other financial liabilities – 1,292 – – 277 – – – 1,569

Total financial liabilities 629,683 495,035 34,543 48,470 53,921 27,074 33,797 22,865 1,345,388









The Group £m £m £m £m £m £m £m £m £m

AssetsCash and balances at central banks 29,774 245 – – – – – – 30,019Items in course of collection from other banks 1,619 76 – – – – – – 1,695Trading portfolio assets 185,646 – – – – – – – 185,646Financial assets designated at fair value:– held on own account 661 13,861 1,648 5,861 5,420 6,738 4,159 16,194 54,542Derivative financial instruments:– held for trading 981,996 – – – – – – – 981,996– designated for risk management – 381 91 542 505 336 419 532 2,806Loans and advances to banks 4,882 35,690 505 1,892 1,887 1,854 52 945 47,707Loans and advances to customers 51,155 87,624 12,447 21,976 60,927 44,982 57,409 125,295 461,815Available for sale financial investments 132 11,539 5,129 13,461 10,266 6,660 9,819 8,010 65,016Reverse repurchase agreements and cash collateral on securities borrowed 29 107,415 8,947 2,582 10,124 1,019 238 – 130,354Other financial assets – 2,459 – – 637 – – – 3,096

Total financial assets 1,255,894 259,290 28,767 46,314 89,766 61,589 72,096 150,976 1,964,692

Other assets 88,337


LiabilitiesDeposits from other banks 10,850 94,083 6,040 1,273 1,585 461 433 185 114,910Items in the course of collection due to other banks 1,633 2 – – – – – – 1,635Customer accounts 195,756 112,582 9,389 10,099 2,451 1,555 1,395 2,306 335,533Trading portfolio liabilities 59,474 – – – – – – – 59,474Financial liabilities designated at fair value:– held on own account 1,043 16,573 10,630 5,115 12,229 12,041 11,825 7,436 76,892Derivative financial instruments:– held for trading 964,071 – – – – – – – 964,071– designated for risk management – 222 141 1,345 1,197 108 781 207 4,001Debt securities in issue 2,567 79,600 13,908 17,197 23,355 9,856 2,528 4,415 153,426Repurchase agreements and cash collateral on securities lent 69 176,169 3,409 2,067 245 267 59 – 182,285Subordinated liabilities – 260 49 281 1,345 999 10,176 16,732 29,842Other financial liabilities – 4,573 – – 1,572 – – – 6,145

Total financial liabilities 1,235,463 484,064 43,566 37,377 43,979 25,287 27,197 31,281 1,928,214










The Bank £m £m £m £m £m £m £m £m £m

AssetsCash and balances at central banks 24,784 83 – – – – – 24,867Items in course of collection from other banks 1,432 34 – – – – – – 1,466Trading portfolio assets 116,522 – – – – – – – 116,522Financial assets designated at fair value:– held on own account 213 2,941 582 3,902 3,044 4,114 3,335 15,967 34,098Derivative financial instruments:– held for trading 1,001,250 – – – – – – – 1,001,250– designated for risk management – 221 81 497 460 302 385 489 2,435Loans and advances to banks 2,695 29,739 435 1,376 1,590 1,022 61 906 37,824Loans and advances to customers 71,170 216,131 9,237 15,692 52,651 38,584 55,631 94,793 553,889Available for sale financial investments 45 7,644 3,655 11,252 6,492 5,546 8,482 14,786 57,902Reverse repurchase agreements and cash collateral on securities borrowed – 108,911 6,834 2,525 10,125 182 238 – 128,815Other financial assets – 1,973 – – 295 – – – 2,268

Total financial assets 1,218,111 367,677 20,824 35,244 74,657 49,750 68,132 126,941 1,961,336

Other assets 26,206


LiabilitiesDeposits from other banks 22,470 95,051 6,239 1,572 1,494 422 293 10 127,551Items in the course of collection due to other banks 1,556 2 – – – – – – 1,558Customer accounts 171,313 223,518 9,948 7,887 12,599 10,120 5,470 3,989 444,844Trading portfolio liabilities 39,428 – – – – – – – 39,428Financial liabilities designated at fair value:– held on own account 1,001 11,997 10,342 5,012 11,462 11,613 11,827 7,404 70,658Derivative financial instruments:– held for trading 985,305 – – – – – – – 985,305– designated for risk management – 70 142 1,319 1,190 96 777 198 3,792Debt securities in issue 2,449 46,310 9,432 13,353 11,838 974 373 170 84,899Repurchase agreements and cash collateral on securities lent – 143,548 2,848 2,018 245 267 24 – 148,950Subordinated liabilities – – 31 275 1,229 750 9,868 17,015 29,168Other financial liabilities – 8,362 – – 2,009 – – – 10,371

Total financial liabilities 1,223,522 528,858 38,982 31,436 42,066 24,242 28,632 28,786 1,946,524



Cumulative liquidity gap (5,411) (166,592) (184,750) (180,942) (148,351) (122,843) (83,343) 14,812 33,879

Expected maturity dates do not differ significantly from the contract dates, except for:

– Trading Portfolio Assets and Liabilities and derivative financial instruments, which may not be held to maturity as part of the Group’s trading strategies. Forthese instruments, which are mostly held by Barclays Capital, liquidity and repricing risk is managed through the Daily Value at Risk (DVaR) methodology.

– Retail deposits, which are included within customer accounts, are repayable on demand or at short notice on a contractual basis. In practice, theseinstruments form a stable base for the Group’s operations and liquidity needs because of the broad base of customers – both numerically and bydepositor type.

– Financial assets designated at fair value held in respect of linked liabilities, which are managed with the associated liabilities.


49 Liquidity risk continuedContractual maturity of financial liabilities on an undiscounted basisThe table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows of all financial liabilities (i.e. nominal values), whereas the Group managesthe inherent liquidity risk based on discounted expected cash inflows. Derivative financial instruments held for trading and trading portfolio liabilities areincluded in the on demand column at their fair value.

At 31st December 2009 Over one yearbut less

On Within than Overdemand one year five years five years Total

£m £m £m £m £m

The GroupDeposits from other banks 3,861 70,645 1,607 773 76,886Items in the course of collection due to other banks 1,373 93 – – 1,466Customer accounts 205,894 106,991 6,899 5,488 325,272Trading portfolio liabilities 51,252 – – – 51,252Financial liabilities designated at fair value:– held on own account 1,219 31,030 35,733 34,206 102,188Derivative financial instruments:– held for trading 402,019 – – – 402,019– designated for risk management – 311 627 998 1,936Debt securities in issue 64 82,215 46,055 22,243 150,577Repurchase agreements and cash collateral on securities lent 502 197,864 450 37 198,853Subordinated liabilities – 2,101 6,295 26,842 35,238Other financial liabilities – 4,959 1,135 – 6,094

Total financial liabilities 666,184 496,209 98,801 90,587 1,351,781

Off-balance sheet itemsLoan commitments 127,540 74,111 4,181 861 206,693Other commitments 386 384 19 – 789

Total off-balance sheet items 127,926 74,495 4,200 861 207,482

Total financial liabilities and off-balance sheet items 794,110 570,704 103,001 91,448 1,559,263

The BankDeposits from other banks 14,251 72,587 2,876 1,054 90,768Items in the course of collection due to other banks 1,374 10 – – 1,384Customer accounts 162,323 263,207 15,340 7,311 448,181Trading portfolio liabilities 33,534 – – – 33,534Financial liabilities designated at fair value:– held on own account 1,146 29,668 34,897 33,490 99,201Derivative financial instruments:– held for trading 417,055 – – – 417,055– designated for risk management – 264 644 889 1,797Debt securities in issue – 47,324 32,274 12,485 92,083Repurchase agreements and cash collateral on securities lent – 164,483 450 430 165,363Subordinated liabilities – 1,785 5,242 26,535 33,562Other financial liabilities – 1,292 277 – 1,569

Total financial liabilities 629,683 580,620 92,000 82,194 1,384,497



Total financial liabilities and off-balance sheet items 747,881 619,451 94,816 82,634 1,544,782




At 31st December 2008 Over one year

but not On Within more than Over

demand one year five years five years Total£m £m £m £m £m

The GroupDeposits from other banks 10,850 101,537 2,224 671 115,282Items in the course of collection due to other banks 1,633 2 – – 1,635Customer accounts 195,756 132,927 5,249 5,807 339,739Trading portfolio liabilities 59,474 – – – 59,474Financial liabilities designated at fair value:– held on own account 1,043 33,860 28,300 30,427 93,630Derivative financial instruments:– held for trading 964,071 – – – 964,071– designated for risk management – 1,809 1,671 1,206 4,686Debt securities in issue 2,567 112,816 34,510 11,853 161,746Repurchase agreements and cash collateral on securities lent 69 181,895 547 24 182,535Subordinated liabilities a – 1,273 5,114 28,726 35,113Other financial liabilities – 4,573 1,572 – 6,145

Total financial liabilities 1,235,463 570,692 79,187 78,714 1,964,056

Off-balance sheet itemsLoan commitments 222,801 30,502 5,799 917 260,019Other commitments 493 318 340 – 1,151


Total financial liabilities and off-balance sheet items 1,458,757 601,512 85,326 79,631 2,225,226

The BankDeposits from other banks 22,470 103,055 2,035 308 127,868Items in the course of collection due to other banks 1,556 2 – – 1,558Customer accounts 171,313 241,402 24,747 11,175 448,637Trading portfolio liabilities 39,428 – – – 39,428Financial liabilities designated at fair value:– held on own account 1,001 28,784 27,155 30,391 87,331Derivative financial instruments:– held for trading 985,305 – – – 985,305– designated for risk management – 2,267 1,307 927 4,501Debt securities in issue 2,449 70,172 13,578 692 86,891Repurchase agreements and cash collateral on securities lent – 148,584 578 25 149,187Subordinated liabilities a – 938 4,655 28,680 34,273Other financial liabilities – 8,362 2,009 – 10,371

Total financial liabilities 1,223,522 603,566 76,064 72,198 1,975,350



Total financial liabilities and off-balance sheet items 1,382,929 629,308 80,422 72,532 2,165,191

Financial liabilities designated at fair value in respect of linked liabilities under investment contracts have been excluded from this analysis as the Group is not exposed to liquidity risk arising from them. Any request for funds from the investors would be met simultaneously from the linked assets.

The balances in the above table do not agree directly to the balances in the consolidated balance sheet as the table incorporates all cashflows, on anundiscounted basis, related to both principal as well as those associated with all future coupon payments.

The principal due under perpetual subordinated liability instruments has been included in the over five years category. Further interest payments have not been included on this amount, which according to their strict contractual terms, could carry on indefinitely.

Notea Subordinated liabilities maturity has been reanalysed to reflect the date on

which the counterparty can require repayment as opposed to the date of first call.


50 Fair value of financial instrumentsThe fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, in an arm’s-length transaction betweenknowledgeable willing parties.

Comparison of carrying amounts and fair valuesThe following table summarises the carrying amounts of financial assets and liabilities presented on the Group and the Bank’s balance sheets, and their fairvalues differentiating between financial assets and liabilities subsequently measured at fair value and those subsequently measured at amortised cost:

2009 2008

Carrying Fair Carrying Fairamount value amount value

The Group Notes £m £m £m £m

Financial assets:Cash and balances at central banks a 81,483 81,483 30,019 30,019Items in the course of collection from other banks a 1,593 1,593 1,695 1,695Trading portfolio assets– Treasury and other eligible bills b 9,926 9,926 4,544 4,544– Debt securities b 116,594 116,594 148,686 148,686– Equity securities b 19,653 19,653 30,544 30,544– Traded Loans b 2,962 2,962 1,070 1,070– Commodities b 2,260 2,260 802 802Financial assets designated at fair value:held in respect of linked liabilities under investment contracts b 1,257 1,257 66,657 66,657held under own account:– Equity securities b 6,256 6,256 6,496 6,496– Loans and advances b 22,390 22,390 30,187 30,187– Debt securities b 4,007 4,007 8,628 8,628– Other financial assets designated at fair value b 8,658 8,658 9,231 9,231Derivative financial instruments b 416,815 416,815 984,802 984,802Loans and advances to banks c 41,135 41,135 47,707 47,594Loans and advances to customers– Residential mortgage loans c 149,099 142,726 139,845 138,373– Credit card receivables c 21,889 21,889 22,304 22,312– Other personal lending c 25,435 25,430 27,270 26,496– Wholesale and corporate loans and advances c 212,928 207,648 259,699 247,798– Finance lease receivables c 10,873 10,898 12,697 12,697Available for sale financial instruments – Treasury and other eligible bills b 5,919 5,919 4,003 4,003– Debt securities b 43,888 43,888 58,831 58,831– Equity securities b 6,844 6,844 2,182 2,182Reverse repurchase agreements and cash collateral on securities borrowed c 143,431 142,524 130,354 129,296Financial liabilities:Deposits from banks d 76,446 76,457 114,910 114,912Items in the course of collection due to other banks a 1,466 1,466 1,635 1,635Customer accounts:– Current and demand accounts d 100,710 100,710 82,515 82,515– Savings accounts d 81,188 81,188 76,008 76,008– Other time deposits d 140,557 140,570 177,010 176,944Trading portfolio liabilities:– Treasury and other eligible bills b 381 381 79 79– Debt securities b 44,327 44,327 44,309 44,309– Equity securities b 6,468 6,468 14,919 14,919– Commodities b 76 76 167 167Financial liabilities designated at fair value: – Liabilities to customers under investment contracts b 1,679 1,679 69,183 69,183– Held on own account b 86,202 86,202 76,892 76,892Derivative financial instruments b 403,416 403,416 968,072 968,072Debt securities in issue d 135,902 135,405 153,426 152,595Repurchase agreements and cash collateral on securities lent d 198,781 198,781 182,285 182,285Subordinated liabilities d 25,816 25,299 29,842 22,944



50 Fair value of financial instruments continued

2009 2008

Carrying Fair Carrying Fairamount value amount value

The Bank Notes £m £m £m £m

Financial assets:Cash and balances at central banks a 78,447 78,447 24,867 24,867Items in the course of collection from other banks a 1,373 1,373 1,466 1,466Trading portfolio assets:– Treasury and other eligible bills b 8,969 8,969 425 425– Debt securities b 74,711 74,111 102,923 102,923– Equity securities b 5,552 5,552 11,704 11,704– Traded Loans b 2,945 2,945 1,047 1,047– Commodities b 1,629 1,629 423 423Financial assets designated at fair value: held in respect of linked liabilities under investment contracts b – – – –held under own account:– Equity securities b 66 66 12 12– Loans and advances b 21,636 21,636 24,596 24,596– Debt securities b 3,338 3,338 7,801 7,801– Other financial assets designated at fair value b 2,605 2,605 1,689 1,689Derivative financial instruments b 429,895 429,895 1,003,685 1,003,685Loans and advances to banks c 42,963 42,963 37,824 37,711Loans and advances to customers:– Residential mortgage loans c 110,605 104,227 107,663 106,165– Credit card receivables c 11,523 11,523 11,511 11,519– Other personal lending c 14,125 14,125 18,289 18,003– Wholesale and corporate loans and advances c 375,513 370,198 416,082 404,235– Finance lease receivables c 362 362 344 344Available for sale financial instruments:– Treasury and other eligible bills b 1,093 1,093 380 380– Debt securities b 34,891 34,891 57,061 57,061– Equity securities b 590 590 461 461Reverse repurchase agreements and cash collateral on securities borrowed c 145,433 144,526 128,815 127,757Financial liabilities:Deposits from banks d 90,253 90,265 127,551 127,553Items in the course of collection due to other banks a 1,384 1,384 1,558 1,558Customer accounts b 444,519 444,510 444,844 444,792Trading portfolio liabilities:– Treasury and other eligible bills b 73 73 39 39– Debt securities b 30,920 30,920 35,954 35,954– Equity securities b 2,465 2,465 3,268 3,268– Commodities b 76 76 167 167Financial liabilities designated at fair value– Liabilities to customers under investment contracts b – – – –– held on own account b 83,546 83,546 70,658 70,658Derivative financial instruments b 418,354 418,354 989,097 989,097Debt securities in issue d 82,141 82,569 84,899 85,047Repurchase agreements and cash collateral on securities lent d 165,195 165,195 148,950 148,950Subordinated liabilities d 24,893 24,120 29,168 22,246


50 Fair value of financial instruments continuedNotes a) Fair value approximates carrying value due to the short-term nature of these financial assets and liabilities.

b) The carrying value of financial instruments subsequently measured at fair value (including those held for trading, designated at fair value, derivatives andavailable for sale) is determined in accordance with accounting policy as noted on pages 23 to 24 and further description and analysis of these fair valuesare set out below.

c) The carrying value of financial assets subsequently measured at amortised cost (including loans and advances, and other lending such as reverserepurchase agreements and cash collateral on securities borrowed) is determined in accordance with the accounting policy as noted on page 24. Inmany cases the fair value disclosed approximates the carrying value because the instruments are short term in nature or have interest rates that repricefrequently. In other cases, fair value is determined using discounted cash flows, applying either market derived interest rates or, where the counterparty isa bank, rates currently offered by other financial institutions for placings with similar characteristics. Alternatively, fair value can be determined byapplying an average of available regional and industry segmental credit spreads to the loan portfolio, taking the contractual maturity of the loan facilitiesinto consideration.

d) The carrying value of financial liabilities subsequently measured at amortised cost (including customer accounts and other deposits such as repurchaseagreements and cash collateral on securities lent, debt securities in issue, subordinated liabilities) is determined in accordance with the accounting policyas noted on page 24. In many cases, the fair value disclosed approximates the carrying value because the instruments are short term in nature or haveinterest rates that reprice frequently such as customer accounts and other deposits and short term debt securities. Fair values of other debt securities inissue are based on quoted prices where available, or where these are unavailable, are estimated using a valuation model. Fair values for dated andundated convertible and non convertible loan capital are based on quoted market rates for the issue concerned or similar issues with similar terms andconditions.

Valuation inputsDuring the year, the Group adopted the requirements of IFRS7 – Financial Instruments: Disclosures. This requires an entity to classify its financial assets andliabilities held at fair value according to a hierarchy that reflects the significance of observable market inputs. The classification of these instruments is basedon the lowest level input that is significant to the fair value meaurement in its entirety. The three levels of the fair value hierarchy are defined below.

Quoted market prices - Level 1Financial instruments, the valuation of which are determined by reference to unadjusted quoted prices for identical assets or liabilities in active marketswhere the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm’s length basis. An activemarket is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.

This category includes highly liquid government bonds, short dated US agency securities, active listed equities and actively exchange-traded derivatives.

Valuation technique using observable inputs - Level 2 Financial instruments that have been valued using inputs other than quoted prices as described for level 1 but which are observable for the asset or liability,either directly or indirectly.

This category includes most investment grade and liquid high yield bonds; asset backed securities; long dated US agency securities; certain governmentbonds, less liquid listed equities; bank, corporate, and municipal obligations; certain OTC derivatives; certain convertible bonds; certificates of deposit andcommercial paper; certain collateralised debt obligations (CDOs) (cash and synthetic underlyings); collateralised loan obligations (CLOs); commoditiesbased derivatives; credit derivatives, certain credit default swaps (CDSs); most fund units; certain loans; foreign exchange spot and forward transactions;and certain issued notes.

Valuation technique using significant unobservable inputs - Level 3Financial instruments, the valuation of which incorporate significant inputs for the asset or liability that are not based on observable market data(unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. Theseinputs are generally determined based on observable inputs of a similar nature, historic observations on the level of the input or analytical techniques.

This category includes certain corporate debt securities; highly distressed debt; private equity investments; commercial real estate loans; certain OTCderivatives (requiring complex and unobservable inputs such as correlations and long dated volatilities); certain convertible bonds; some CDOs (cash andsynthetic underlyings); certain credit default swaps; derivative exposures to Monoline insurers; fund units; certain asset backed securities; certain issuednotes; certain collateralised loan obligations (CLOs) and certain loans.



50 Fair value of financial instruments continuedThe following tables show the Group’s financial assets and liabilities that are recognised and measured at fair value and analysed by level within the fair value hierarchy.

Financial assets and liabilities measured at fair value Valuation technique using

Quoted Significantmarket Observable unobservableprices inputs inputs

(Level 1) (Level 2) (Level 3) TotalThe Group £m £m £m £m

31st December 2009Trading portfolio assets 76,256 69,061 6,078 151,395Financial assets designated at fair value:– held on own account 5,766 24,845 10,700 41,311– held in respect of linked liabilities to customers under investment contracts 1,209 48 – 1,257Derivative financial assets 3,163 401,451 12,201 416,815Available for sale assets 20,087 35,287 1,277 56,651

Total assets 106,481 530,692 30,256 667,429

Trading portfolio liabilities (42,238) (8,936) (78) (51,252)Financial liabilities designated at fair value – (82,374) (3,828) (86,202)Liabilities to customers under investment contracts (109) (1,570) – (1,679)Derivative financial liabilities (2,386) (391,916) (9,114) (403,416)

Total liabilities (44,733) (484,796) (13,020) (542,549)

31st December 2008Trading portfolio assets 72,120 98,901 14,625 185,646Financial assets designated at fair value:– held on own account 5,129 32,340 17,073 54,542– held in respect of linked liabilities to customers under investment contracts 33,554 32,495 608 66,657Derivative financial assets 5,548 956,348 22,906 984,802Available for sale assets 14,431 47,448 3,137 65,016

Total assets 130,782 1,167,532 58,349 1,356,663

Trading portfolio liabilities (42,777) (16,439) (258) (59,474)Financial liabilities designated at fair value (23) (73,698) (3,171) (76,892)Liabilities to customers under investment contracts (32,640) (35,935) (608) (69,183)Derivative financial liabilities (3,516) (949,143) (15,413) (968,072)

Total liabilities (78,956) (1,075,215) (19,450) (1,173,621)



Financial assets and liabilities measured at fair value Valuation technique using

Quoted Significantmarket Observable unobservableprices inputs inputs

(Level 1) (Level 2) (Level 3) TotalThe Bank £m £m £m £m

31st December 2009Trading portfolio assets 46,803 42,559 4,444 93,806Financial assets designated at fair value:– held on own account 9 21,656 5,980 27,645– held in respect of linked liabilities to customers under investment contracts – – – –Derivative financial assets 13 416,016 13,866 429,895Available for sale assets 7,739 27,968 867 36,574

Total assets 54,564 508,199 25,157 587,920

Trading portfolio liabilities (27,967) (5,558) (9) (33,534)Financial liabilities designated at fair value – (80,924) (2,622) (83,546)Liabilities to customers under investment contracts – – – –Derivative financial liabilities (13) (408,487) (9,854) (418,354)

Total liabilities (27,980) (494,969) (12,485) (535,434)

31st December 2008Trading portfolio assets 46,029 57,952 12,541 116,522Financial assets designated at fair value:– held on own account 2 26,131 7,965 34,098– held in respect of linked liabilities to customers under investment contracts – – – –Derivative financial assets – 978,681 25,004 1,003,685Available for sale assets 13,624 43,116 1,162 57,902

Total assets 59,655 1,105,880 46,672 1,212,207

Trading portfolio liabilities (32,547) (6,625) (256) (39,428)Financial liabilities designated at fair value – (67,841) (2,817) (70,658)Liabilities to customers under investment contracts – – – –Derivative financial liabilities – (974,479) (14,618) (989,097)

Total liabilities (32,547) (1,048,945) (17,691) (1,099,183)

The tables above have been compiled using the new definitions required by IFRS7 revised and, as a result, the classifications of assets and liabilities are notdirectly comparable to the previously published tables of fair value measurement.

The following table shows the Group’s financial assets and liabilities that are recognised and measured at fair value disaggregated by valuation techniquesand by product type.

Financial assets and liabilities measured at fair value by product typeAt 31st December 2009 Assets Liabilities

Valuation technique using Valuation technique using

Significant SignificantQuoted Observable unobservable Quoted Observable unobservable

market prices inputs inputs market prices inputs inputsLevel 1 Level 2 Level 3 Level 1 Level 2 Level 3

The Group £m £m £m £m £m £m

Commercial real estate loans – – 7,170 – – –Asset backed products – 34,779 5,840 – (6,165) (2,334)Other credit products 1 47,202 2,020 – (47,904) (2,827)Derivative exposure to Monoline insurers – – 2,027 – – –Non-asset backed debt instruments 72,578 66,936 3,127 (35,760) (73,371) (3,202)Equity products 28,221 11,772 1,536 (8,788) (13,737) (1,922)Private equity 73 176 1,978 – – –Funds and fund-linked products 3,856 5,387 1,241 – (2,049) –FX products – 24,885 761 – (25,159) (379)Interest rate products 176 288,718 2,357 – (275,684) (1,775)Commodity products 1,414 31,562 748 (76) (37,091) (581)Other 162 19,275 1,451 (109) (3,636) –

Total 106,481 530,692 30,256 (44,733) (484,796) (13,020)




Level 3 financial assets and liabilities by balance sheet classification and product typeAs at 31st December 2009 Non-derivative assets Non-derivative liabilities Derivatives

Financial Financial NetTrading assets Trading liabilities derivative

portfolio designated at Available for portfolio designated at financialassets Fair value sale assets liabilities Fair value instrumentsa

The Group £m £m £m £m £m £m

Commercial real estate loans – 7,170 – – – –Asset backed products 1,840 423 205 (5) (63) 1,106Other credit products – 92 – – (595) (304)Derivative exposure to Monoline insurers – – – – – 2,027Non-asset backed debt instruments 2,461 438 166 (73) (3,081) 14Equity products 190 – 157 – – (733)Private equity 104 1,237 637 – – –Funds and fund-linked products 1,128 8 105 – – –FX products – – – – – 382Interest rate products – 64 – – (25) 543Commodity products – 12 4 – (64) 215Other 355 1,256 3 – – (163)

Total 6,078 10,700 1,277 (78) (3,828) 3,087

Level 3 Movement AnalysisThe following tables summarise the movements in the level 3 balances during the year ended 31st December 2009. The tables show gains and losses andincludes amounts for all financial assets and liabilities transferred to level 3 during the year. The tables do not reflect gains and losses for level 3 financialassets and liabilities that were transferred out during the year. Transfers have been reflected as if they had taken place at the beginning of the year.

Analysis of movement in Level 3 financial assets and liabilitiesFor the period ended 31st December 2009 Financial Financial Net

Trading assets Trading liabilities Derivativeportfolio designated at Available for portfolio designated at financial

assets Fair value sale assets liabilities Fair value instrumentsa,b Total£m £m £m £m £m £m £m

The GroupAs at 1st January 2009 14,625 17,681 3,137 (258) (3,779) 7,493 38,899Purchases 2,021 700 459 (70) (313) 2,334 5,131Sales (7,018) (4,875) (9) 172 690 (3,548) (14,588)Issues – – – – (1,343) (1,718) (3,061)Settlements (410) (804) (347) – 763 (100) (898)Total gains and losses in the periodRecognised in the income statement– trading income (2,290) (3,356) – 27 1,574 (3,516) (7,561)– other income – (434) (131) – – – (565)Total gains or losses recognised in other comprehensive income – – (103) – – – (103)Transfers in/transfers out (850) 1,788 (1,729) 51 (1,420) 2,142 (18)

As at 31st December 2009 6,078 10,700 1,277 (78) (3,828) 3,087 17,236

The BankAs at 1st January 2009 12,541 7,965 1,162 (256) (2,817) 10,386 28,981Purchases 751 414 251 (2) (110) 1,767 3,071Sales (5,875) (1,207) – 171 79 (3,503) (10,335)Issues – – – – (1,132) (1,074) (2,206)Settlements (159) (465) (114) – 352 (220) (606)Total gains and losses in the periodRecognised in the income statement– trading income (2,384) (1,277) – 26 1,609 (5,267) (7,293)– other income – 21 (21) – – – –Total gains or losses recognised in other comprehensive income – – (271) – – – (271)Transfers in/transfers out (430) 529 (140) 52 (603) 1,923 1,331

Total 4,444 5,980 867 (9) (2,622) 4,012 12,672

Notesa The Group’s derivative financial instruments in the tables above are represented on a net

basis of £3,087m. On a gross basis derivative financial assets are £12,201m, derivativefinancial liabilities are £9,114m.

b The Bank’s derivative financial instruments in the table above are represented on a net basisof £4,012m. On a gross basis derivative financial assets are £13,866m, derivative financialliabilities are £9,854m.


50 Fair value of financial instruments continuedThe following table discloses the gains and losses recognised in the period arising on level 3 financial assets and liabilities held as at 31st December 2009.

Gains and losses recognised during the period on Level 3 financial assets and liabilities heldAs at 31st December 2009 Financial Financial Net

Trading assets Trading liabilities Derivativeportfolio designated at Available for portfolio designated at financial

assets Fair value sale assets liabilities Fair value instruments Total£m £m £m £m £m £m £m

The GroupTotal gains and losses held as at 31st December 2009Recognised in the income statement– trading income (736) (3,034) – 8 (269) (2,817) (6,848)– other income – (452) (140) – – – (592)Total gains or losses recognised in other comprehensive income – – (65) – – – (65)

Total (736) (3,486) (205) 8 (269) (2,817) (7,505)

The BankTotal gains and losses held as at 31st December 2009Recognised in the income statement– trading income (855) (3,026) – 8 (235) (2,725) (6,833)– other income – (405) (16) – – – (421)Total gains or losses recognised in other comprehensive income – – (279) – – – (279)

Total (855) (3,431) (295) 8 (235) (2,725) (7,533)

The significant movements in the level 3 positions during the year ended 31st December 2009 are explained below:

– Purchases of £5.1bn were primarily composed of £1.7bn of asset backed products, £1.5bn of credit derivatives and £0.6bn of equity products.

– Sales of £14.6bn include the disposal of £7.5bn of asset backed products and Monoline exposures through the Protium transaction. The Crescent debtrestructuring, disclosed in Note 40, resulted in the sale of £1.0bn of commercial real estate loans and there were additional sales of £3.8bn asset backedproducts and £0.6bn Monoline exposures during the period.

– Issuances of £3.1bn were driven by £1.3bn of new credit-linked notes and equity, credit and commodity derivatives of £1.7bn.

– Losses in Trading Income of £7.6bn were primarily attributable to the £4.4bn of writedowns on the credit market exposures summarised in Note 47, along with writedowns on other asset backed products, funds and other Monoline insurers. These were offset by gains on interest rate and commodityproducts.

– Losses in Other Income of £0.6bn were driven by the writedown and impairment of commercial real estate loans.

– Transfers into level 3 were largely due to the lack of observable valuation inputs for certain securities as well as curves becoming unobservable for certainderivative products.

– Transfers out of level 3 were principally due to unobservable valuation inputs being deemed insignificant to the overall valuation of certain instruments,particularly on investment grade asset backed products.

There were no significant transfers between level 1 and level 2.

Valuation techniquesValuations based on observable inputs include financial instruments such as swaps and forwards which are valued using market standard pricingtechniques; and options that are commonly traded in markets where all the inputs to the market standard pricing models are observable.

Valuation models are reviewed at least annually for model performance and calibration. Current year valuation methodologies were consistent with the prior year unless otherwise noted below. These methodologies are commonly used by market participants.

The main products whose valuation includes unobservable inputs are described below.



50 Fair value of financial instruments continuedCommercial real estate loansThis category includes lending on a range of commercial property types including retail, hotels, office and development properties.

The valuations are considered unobservable due to the bespoke nature of the instruments and the high level of volatility in the commercial real estatemarket at present. Fair value is calculated using a risk adjusted spread based methodology performed on a loan by loan basis with consideration ofcharacteristics such as property type, geographic location, yields, credit quality and property performance reviews.

The valuation inputs are reviewed with reference to CMBX and CMBS bond indices. Initial spreads are sourced from market quoted origination spreads byproperty type and classified into Loan-to-Value (LTV) buckets which are adjusted for internal credit rating and subordination of the loans. The internal creditratings used in the valuation model are subject to a monthly review process. The model is calibrated monthly based on external quotes of new originationproperty type spreads and the latest internal credit ratings.

The methodology used differs to the prior period in that internal credit ratings, additional risk factors and property performance reviews are nowincorporated. The changes were made to take advantage of data that has become available and to enhance the assessment of credit risk.

Asset backed productsThese are debt and derivative products that are linked to the cash flows of a pool of referenced assets. This category includes asset backed loans; CDOs(cash underlyings); CLOs; asset backed credit derivatives; asset and mortgage backed securities.

Within this population, valuation inputs are unobservable for non-investment grade ABS; non-agency residential mortgage backed securities (RMBS)and asset backed credit derivatives. The valuations are determined using industry standard cash flow models that calculate fair value based on lossprojections, prepayment, recovery and discount rates. These parameters are determined by reference to underlying collateral performance, independentresearch, ABX indices, broker quotes, observable trades on similar securities and third party pricing sources.

The determination of parameter levels takes account of a range of factors such as deal vintage, underlying asset composition (historical losses; borrowercharacteristics; various loan attributes such as loan-to-value and debt-to-income ratios and geographic concentration), credit ratings (original and current),home price changes and interest rates.

Other credit productsThese products are linked to the credit spread of a referenced entity, index or basket of referenced entities. This category includes synthetic CDOs; single nameand index CDS and Nth to default basket swaps. Within this population, valuation inputs are unobservable for certain synthetic CDOs and CDS with illiquidreference assets.

Synthetic CDOs are valued using a model that calculates fair value based on observable and unobservable parameters including credit spreads, recoveryrates, correlations and interest rates and is calibrated daily. For index and bespoke synthetic CDOs with unobservable inputs, correlation is set with referenceto index tranche market.

CDS with illiquid reference assets are valued using an industry standard ‘hazard-type’ model that calculates fair value of the credit protection using interestrates, credit spreads and recovery rates of the underlying issuers. Interest rates are observable and sourced from liquid interest rate instruments. Creditspreads are unobservable and are determined with reference to recent transactions or bond spreads from observable issuances of the same issuer or othersimilar obligors as a proxy.

Derivative exposure to Monoline insurersThese products comprise securities, principally CLOs, on which default protection has been purchased. Credit spreads of the counterparty providingprotection are unobservable.

The derivative positions are valued with reference to the price of the underlying security. As the security and derivative are hedged, the net present value ofthe derivative increases as the net present value of the security decreases. The derivative valuation is then adjusted to reflect the credit quality of thecounterparty.

Non-asset backed debt instrumentsThese are government bonds; US agency bonds; corporate bonds; commercial paper; certificates of deposit; convertible bonds; notes and other non-assetbacked bonds. Within this population, valuation inputs are unobservable for certain convertible bonds, corporate bonds and issued notes.

Convertible bonds are valued using prices observed through broker sources, market data services and trading activity. Prices are validated against liquidexternal sources. Where liquid external sources are not available, fair value is determined using a spread to the equity conversion value or the value of thebond without the additional equity conversion. The spread level is determined with reference to similar proxy assets. Positions are valued on a daily basis.

Corporate bonds are valued on a price basis or using spreads over risk free interest rate curves built from liquid instruments. Where unobservable, bondspreads are determined by reference to either issuances or alternatively CDS spreads of the same issuer are used as proxy inputs to obtain discounted cashflows and accordingly the value of the bond. In the absence of observable bond or CDS spreads of the respective issuer, similar reference assets or sectoraverages are applied as a proxy.

Fixed and floating rate notes issued, in certain emerging markets, are valued using models that discount expected future cash flows. These proprietarymodels calculate fair value based on observable interest rates and unobservable funding or credit spreads. The interest rates are derived from broker andbank notes rates. Funding spreads up to five years are sourced from negotiable commercial deposit rates in the market as a proxy. Funding spreads greaterthan five years are determined by applying linear extrapolation.


50 Fair value of financial instruments continuedEquity productsThis category includes listed equities; exchange traded derivatives; OTC equity derivatives; preference shares and contracts for difference. Within thispopulation, valuation inputs for certain OTC equity derivatives are unobservable.

OTC equity derivatives valuations are determined using industry standard models. The models calculate fair value based on input parameters such as stockprices, dividends, volatilities, interest rates, equity repo curves and, for multi-asset products, correlations. In general, input parameters are deemed observableup to liquid maturities which are determined separately for each parameter and underlying instrument. Unobservable model inputs are set by referencingliquid market instruments and applying extrapolation techniques to match the risk profile of the trading portfolio. These are validated against consensusmarket data services for the same or similar underlying instrument. Models are calibrated daily based on liquid market instrument prices.

Private equityPrivate equity investments are valued in accordance with the ‘International Private Equity and Venture Capital Valuation Guidelines’. This requires the useof a number of individual pricing benchmarks such as the prices of recent transactions in the same or similar instruments, discounted cash flow analysis,and comparison with the earnings multiples of listed comparative companies. Unobservable inputs include earnings estimates, multiples of comparativecompanies, marketability discounts and discount rates. Model inputs are based on market conditions at the reporting date. The valuation of unquotedequity instruments is subjective by nature. However, the relevant methodologies are commonly applied by other market participants and have beenconsistently applied over time. Full valuations are performed bi-annually, with the portfolio reviewed on a monthly basis for material events that mightimpact upon fair value.

Fund and fund-linked productsThis category includes holdings in hedge funds; funds of funds; and fund derivatives. Fund derivatives are derivatives whose underlyings include mutualfunds, hedge funds, indices and multi-asset portfolios. They are valued using underlying fund prices, yield curves and other available market information.

In general fund holdings are valued based on the latest available valuation received from the fund administrator. Funds are deemed unobservable where thefund is either suspended, in wind-down, has a redemption restriction that severely affects liquidity, or where the latest Net Asset Value (NAV) from the fundadministrators is more than three months old. In the case of illiquid fund holdings the valuation will take account of all available information in relation to theunderlying fund or collection of funds and may be adjusted relative to the performance of relevant index benchmarks. Prices are marked based on availablevaluation data and any adjustments are reviewed on a monthly basis.

FX productsThese products are derivatives linked to the foreign exchange market. This category includes Forward contracts, FX swaps and FX options.

Exotic derivatives are valued using industry standard and proprietary models. Fair value is based on input parameters that include FX rates, interest rates, FXvolatilities, interest rate volatilities, FX interest rate correlations and other model parameters. Unobservable model inputs are set by referencing liquid marketinstruments and applying extrapolation techniques to match the risk profile of the trading portfolio. These are validated against consensus market dataservices on a monthly basis.

Interest rate productsThese are products with a payoff linked to interest rates for example Libor (London interbank offer rate) or inflation rates and indices. This category includesinterest rate and inflation swaps; swaptions; caps; floors; inflation options; Bank of England base rate derivatives and other exotic interest rate derivatives.

Inflation structured and property index-linked products are valued using an industry standard model. The model calculates fair value based on observableand unobservable parameters such as inflation index levels, volatilities and correlations sourced from trading information, broker data and historical analysis.The assumptions and inputs applied reflect observable parameters such as yield curves, interpolation adjustments for the seasonal nature of inflation andvolatility surfaces. The most significant unobservable input is correlation between inflation indices. The suitability of the models employed is reviewed on anannual basis.

Bank of England base rate derivatives are valued using standard discounted cash flows techniques. Bank of England forward base rates are used as inputsinto the valuation model. These forward base rates are constructed from the base rate yield curve set from market data up to five years. For maturitiesgreater than five years, spreads to observable proxies are applied. The base rate yield curve used is updated daily.

Commodity productsThese products are exchange traded and OTC derivatives based on an underlying commodity such as metals, oil and oil related, power and natural gas.Within this population, valuation inputs of certain commodity swaps and options are unobservable.

Valuation inputs of certain commodity swaps and options are determined using models incorporating discounting of cash flows, closed form Black modelsand Monte-Carlo simulation. The models calculate fair value based on inputs such as forward curves, volatility surfaces and tenor correlation. Unobservableinputs are set with reference to similar observable products or by applying extrapolation techniques from the observable market. As markets close atdifferent times, curves are constructed using a spread to the primary market benchmark to ensure that all curves are valued using the dominant marketbase price.

The frequency and method used to calibrate the model is based on an assessment of observable option and swap prices.

Other This category is primarily made up of fixed rate loans, which are valued using models that discount expected future cash flows. These models calculatethe fair value based on observable interest rates and unobservable funding or credit spreads. Unobservable funding or credit spreads are determined byapplying linear extrapolation of observable spreads.



50 Fair value of financial instruments continuedFair value adjustmentsThe main adjustments to model or system balances to arrive at a fair value are described below:

Bid-Offer valuation adjustmentsPortfolios are valued to reflect the most advantageous market price to which Barclays has immediate access. For assets and liabilities where the firm is not amarket maker, mid prices are adjusted to bid and offer prices respectively. The bid-offer adjustment factors reflect the expected close out strategy and, forderivatives, that they are managed on a portfolio basis. The methodology for determining the bid-offer adjustment for a derivative portfolio will generallyinvolve netting between long and short positions and the bucketing of risk by strike and term in accordance with hedging strategy. Bid-offer levels arederived from market sources, such as broker data, and are reviewed periodically. For those assets and liabilities where the firm is a market maker (which isthe case for certain equity, bond and vanilla derivative markets), since the bid-offer spread does not represent a transaction cost, mid prices are used.

Model valuation adjustmentsNew models used for valuing the firm’s positions are reviewed under the firm’s Model Validation Policy. This assesses the assumptions used in modellingand recommends any model fair value adjustments. Such adjustments take account of any model limitations which may include additional model factorssuch as volatility skew or uncertainties such as prepayment rates. These adjustments calibrate the carrying value to fair value. The magnitude of thevaluation adjustment is dependant on the size of portfolio, complexity of the model, whether the model is market standard and to what extent itincorporates all known risk factors. Models and model value adjustment recommendations are subject to an annual review process.

Credit and debit valuation adjustmentsCredit Valuation Adjustments (CVAs) and Debit valuation adjustments (DVAs) are incorporated into derivative valuations to reflect the impact on thefair value of counterparty risk and Barclays’ own credit quality. These adjustments are modelled for OTC derivatives across all asset classes.

Probability of Default (PD) and Loss Given Default (LGD) are applied to expected exposures at a counterparty level to arrive at a CVA and DVA adjustment.

Monoline credit valuation adjustmentsExpected exposure is calculated by simulating default losses on the underlying assets, calibrated to market observable parameters and forward lookingmarket research. This exposure is then adjusted for any spread between prices derived from observable proxies and expected exposure based on the PD orregulatory intervention.

The PD used to calculate the CVA is derived from external ratings cross referenced to internal default grades and is based on internal simulations of credit-factor indices by region and industry designations, calibrated to historical time-series and forecast on the basis of current values. The LGD used to calculatethe CVA is a function of available historical data, the monoline’s credit quality and risk concentration.

Other credit and debit valuation adjustmentsCVAs and DVAs for non Monoline exposures are calculated using Monte-Carlo simulation to generate an expected exposure profile. The expected exposureis calculated at a counterparty level after netting and collateral are applied.

For counterparties with an observable credit market, the PD and LGD are derived from single name credit default swap prices. For all other counterparties,PDs are derived from a combination of industry curves; indices; and loan/note pricing taking into account geographic factors, internal credit ratings, lossassumptions and ratings agency data. Where the curve is unobservable and the CVA is significant to the overall value of the underlying derivative, the fullvalue of the derivative and its associated credit valuation adjustment has been deemed unobservable.

CVAs are not incorporated into the fair value of certain counterparties where the market does not apply a credit charge. The categories of counterpartiesexcluded are as follows:

– Strongly collateralised counterparties – this is any counterparty with a collateral agreement with minimum weekly calls and the collateral threshold plusminimum transfer amount below a defined level;

– Certain highly-rated sovereigns, supra-nationals and government agencies; and

– Liquidity providers – when trading on the interbank market with certain collateralised market making counterparties no counterparty spreads are applied.

Where counterparty credit quality and exposure to that counterparty are linked, wrong way risk may arise. In these instances, wrong way risk suggests thatexposure to the counterparty is likely to increase as counterparty credit quality deteriorates. Exposure to ‘wrong way risk’ is limited via internal governanceprocesses and deal pricing.


50 Fair value of financial instruments continuedOwn credit adjustmentsThe carrying amount of issued notes that are designated under the IAS 39 fair value option is adjusted to reflect the effect of changes in own credit spreads.The resulting gain or loss is recognised in the income statement.

For funded instruments such as issued notes, credit spreads on Barclays issued bonds represent the most appropriate basis for this adjustment. However,from 30th September 2007 to 30th June 2009, Barclays credit default swap spreads were used to calculate the carrying amount of issued notes, since therewere insufficient observable own credit spreads through secondary trading prices in issued bonds. From 1st July 2009, the carrying amount of issued noteshas been calculated using credit spreads derived from secondary trading in Barclays issued bonds.

At 31st December 2009, the own credit adjustment arose from the fair valuation of £61.5bn of Barclays Capital structured notes (31st December 2008:£54.5bn). Barclays credit spreads improved during 2009, leading to a loss of £1,820m (2008: gain £1,663m) from the fair value of changes in own credit.If Barclays had calculated the carrying amount of issued notes using credit default swap spreads at 31st December 2009, the fair value of changes in owncredit would have been a loss of £2,448m in the year.

Barclays Capital also uses credit default swap spreads to determine the impact of Barclays own credit quality on the fair value of derivative liabilities. At 31st December 2009, cumulative adjustments of £307m (31st December 2008: £1,176m) were netted against derivative liabilities. The impact of these adjustments in both periods was more than offset by the impact of the credit valuation adjustments to reflect counterparty creditworthiness thatwere netted against derivative assets.

Unrecognised gains as a result of the use of valuation models using unobservable inputsThe amount that has yet to be recognised in income that relates to the difference between the transaction price (the fair value at initial recognition) and theamount that would have arisen had valuation models using unobservable inputs been used on initial recognition, less amounts subsequently recognised,was as follows:

Year ended 31st December The Group The Bank

2009 2008 2009 2008£m £m £m £m

Opening balance 128 154 113 130Additions 39 77 19 69Amortisation and releases (68) (103) (62) (86)

Closing balance 99 128 70 113



50 Fair value of financial instruments continuedSensitivity analysis of valuations using unobservable inputs

At 31st December 2009 Fair value Favourable changes Unfavourable change

Total Total Profit ProfitThe Group assets liabilities and loss Equity and loss EquityProduct type £m £m £m £m £m £m\

Commercial Real Estate loans 7,170 – 429 – (437) –Asset Backed Products 5,840 (2,334) 175 4 (175) (4)Other credit Products 2,020 (2,827) 171 – (152) –Derivative exposure to Monoline insurers 2,027 – 336 – (532) –Non-Asset Backed Debt Instruments 3,127 (3,202) 145 2 (141) (2)Equity Products 1,536 (1,922) 28 15 (28) (15)Private Equity 1,978 – 267 73 (339) (95)Funds and fund-linked products 1,241 – 100 – (100) –FX Products 761 (379) 33 – (33) –Interest Rate Products 2,357 (1,775) 78 – (78) –Commodity Products 748 (581) 36 – (36) –Other 1,451 – 52 – (52) –

Total 30,256 (13,020) 1,850 94 (2,103) (116)

As part of risk management processes, an analysis is performed on unobservable parameters to generate a range of reasonably possible alternativevaluations.

The effect of stressing the unobservable assumptions to a range of reasonably possible alternatives would be to increase the fair values by up to £1.9bn(2008: £2.4bn) for the Group and £1.5bn for the Bank or to decrease the fair values by up to £2.2bn (2008: £3bn) for the Group and £1.6bn for the Bankwith substantially all the potential effect impacting profit or loss rather than equity. The metric has not been offset for the effect of hedging.

The stresses applied take account of the nature of valuation techniques used, as well as the availability and reliability of observable proxy and historic data.In all cases, an assessment is made to determine the suitability of available data. The sensitivity methodologies are based on a range, standard deviationor spread data of a reliable reference source or a scenario based on alternative market views. The level of shift or scenarios applied is considered for eachproduct and varied according to the quality of the data and variability of underlying market. The approach adopted in determining these sensitivities hasevolved during the year, in the context of changing market conditions.

Commercial real estate loansThe unobservable inputs include but are not limited to market quoted origination spreads, internal credit ratings and subordination of the loans. The sensitivityis determined by applying a +/- 6% shift for each underlying position based on the largest upward and downward price movement of observable publishedindices of a similar nature in the preceding 12-month period.

Asset backed productsFor non-agency RMBS and non-investment grade ABS, sensitivity is calculated on the price movement on observable ABX.HE indices. For asset backedcredit derivatives, sensitivity is calculated on price movements within the ABX.HE.AAA indices. Sensitivity is based on the average of the largest pricemovement upward and the largest price movement downward in the preceding 12-month period.

Other credit productsSensitivity of synthetic CDOs is determined by using valuations based on different assumptions for recovery and tranche mapping. The sensitivityrepresents the impact of the application of different modelling assumptions. These model assumptions change the distribution of losses on the trades.

The sensitivity of valuations of the illiquid CDS portfolio is determined by applying a +/- 0.5% stress to the DV01 for each underlying reference asset. Thestress is based upon the average bid offer spreads observed in the market for similar CDS.

Derivative exposure to Monoline insurersThe main unobservable input in the valuation of the derivative exposure to Monoline insurers is the credit quality of the Monoline insurers. The approach to determine downside sensitivity is dependent on the credit quality of the Monoline insurer. For higher quality Monoline insurers a shift in internal creditratings has been applied. For lower quality Monoline insurers the impact has been assessed by a shift to default and recovery rates. The recovery rate wasset to 10% and risk of default to 100%. To assess the upside risk to Monoline insurers, the underlying assets were flexed by 3%, based on the averagemonthly move for the LCDX index over the preceding 12 month period.


50 Fair value of financial instruments continuedNon-asset backed debt instrumentsThe sensitivity on convertible bonds, is determined by applying a +/- 1% shift for each underlying value. The shift is based upon the bid offer spreadsobserved in the market for similar bonds.

The sensitivity on corporate bonds portfolio is determined by applying a +/- 1% shift for each underlying value. The shift is based upon the average bid offerspreads observed in the market for similar bonds.

The sensitivity for fixed and floating rate notes is calculated using a +/- 1% shift in credit spreads.

Equity productsThe sensitivity is estimated based on the statistical spread of consensus data services either directly or through proxies. The estimate has been calculatedusing 1 standard deviation of the consensus returns.

Private EquityThe relevant valuation models are sensitive to each of the key assumptions, such as projected future earnings, comparator multiples, marketabilitydiscounts and discount rates. Valuation sensitivity is estimated by flexing such assumptions to reasonable alternative levels and determining the impactto the outcome of the valuation, for example comparator multiples for a range of similar companies.

Fund and fund-linked productsThe sensitivity measure is based on observing the largest monthly move in the main hedge fund index (HFRX) over the prior two-year period.

FX productsThe sensitivity is based on the statistical spread of consensus data services. The estimate has been calculated using consensus data service statisticalstandard deviation and this represents 2 standard deviations of the mid correlations.

Interest rate productsFor inflation products, the sensitivity is calculated by stressing the correlation parameters. The sensitivity was determined by applying a +/- 8% shift tothe correlation risk and this was based on the historical observation of correlation levels over the preceding month.

For base rate derivatives, the sensitivity is based on bid offer spreads of base rates swaps. The sensitivity was determined by applying a +/- 0.125% shiftto the PV01 for each underlying position.

Commodity productsThe sensitivity is determined by applying values based on historic variability over two years. The estimate has been calculated using data for shortdatedforward volatility curves to generate a best and worst case likely scenario. The sensitivities are based on a 25% probability of occurrence over two years, andtaking 50% of the difference between the best and worst multiplied by exposure to the relevant risk factor.

Other The sensitivity for fixed rate loans is calculated using a +/- 1% shift in credit spreads.

Valuation control frameworkThe independent price verification process is a key control in ensuring the material accuracy of valuation. Price verification procedures cover all fair valuepositions. Data sources that are most representative of the market and readily available are used. The data sources are assessed against the followingcharacteristics: independence; reliability; consistency between sources and evidence that it represents executable levels. This control process assists inthe determination of whether market levels represent forced transactions which should not be considered in the assessment of fair value.



51 Reclassification of financial assets held for tradingOn 25th November 2009 the Group reclassified certain financial assets, originally classified as held for trading that were deemed to be no longer held fortrading purposes, and thus considered as loans and receivables. The reclassified assets comprised Collateralised Loan Obligations (CLOs) against which theGroup held credit protection with monoline counterparties rated below investment grade.

As at the 25th November, the assets had a carrying value of £8,027m. The effective interest rates on these assets ranged from 0.50% to 2.99% withundiscounted interest and principal cash flows of £8,769m.

In the period prior to reclassification, £1,500m of fair value gains were recognised in the consolidated income statement. Since the 25th November,paydowns and maturities of £26m along with foreign exchange movements on the assets and accrued interest resulted in a carrying value as at31st December 2009 of £8,099m.

The carrying value of the securities reclassified during 2008 into loans and receivables has decreased from £3,986m to £1,279m primarily as a result ofpaydowns and maturities of the underlying securities of £2,733m. No impairment has been identified on these securities.

The following table provides a summary of the assets reclassified from held for trading to loans and advances.

As at 31st December As at 31st December 2009 2008

Carrying Fair Carrying Fairvalue value value value

£m £m £m £m

The Group and The BankTrading assets reclassified to loans and receivablesReclassification 25th November 2009 8,099 7,994 – –Reclassification 16th December 2008 1,279 1,335 3,986 3,984

Total financial assets reclassified to loans and receivables 9,378 9,329 3,986 3,984

If the reclassifications had not been made, the Group's income statement for 2009 would have included net losses on the reclassified trading assets of£49m (2008: £2m).

After reclassification, the reclassified financial assets contributed £192m (2008: £4m) to interest income.


52 Capital ManagementBarclays operates a centralised capital management model, considering both regulatory and economic capital. The capital management strategy is tocontinue to maximise shareholder value through optimising both the level and mix of capital resources. Decisions on the allocation of capital resources areconducted as part of the strategic planning review.

The Group’s capital management objectives are to:

– Maintain sufficient capital resources to meet the minimum regulatory capital requirements set by the FSA and the US Federal Reserve Bank’srequirements that a financial holding company be well capitalised.

– Maintain sufficient capital resources to support the Group’s risk appetite and economic capital requirements.

– Support the Group’s credit rating.

– Ensure locally regulated subsidiaries can meet their minimum capital requirements.

– Allocate capital to businesses to support the Group’s strategic objectives, including optimising returns on economic and regulatory capital.

External Regulatory Capital RequirementsThe Group is subject to minimum capital requirements imposed by the Financial Services Authority (FSA), following guidelines developed by the BaselCommittee on Banking Supervision (the Basel Committee) and implemented in the UK via European Union Directives.

Under Basel II, effective from 1st January 2008, the Group has approval by the FSA to use the advanced approaches to credit and operational riskmanagement. Pillar 1 capital requirements are generated using the Group’s risk models.

Under Pillar 2 of Basel II, the Group is subject to an overall regulatory capital requirement based on individual capital guidance (‘ICG’) received from the FSA. The ICG imposes additional capital requirements in excess of Pillar 1 minimum capital requirements.

Outside the UK, the Group has operations (and main regulators) located in continental Europe, in particular France, Germany, Spain, Portugal and Italy(local central banks and other regulatory authorities); Asia Pacific (various regulatory authorities including the Hong Kong Monetary Authority, theJapanese FSA and the Monetary Authority of Singapore); Africa, where the Group’s operations are headquartered in Johannesburg, South Africa (TheSouth African Reserve Bank and the Financial Services Board (FSB)) and the United States of America (the Board of Governors of the Federal ReserveSystem (FRB) and the Securities and Exchange Commission).

The Group manages its capital resources to ensure that those Group entities that are subject to local capital adequacy regulation in individual countriesmeet their minimum capital requirements. Local management manages compliance with subsidiary entity minimum regulatory capital requirements withreporting to local Asset and Liability Committees and to Treasury Committee, as required.

Regulatory Capital The table below provides details of the regulatory capital resources managed by the Group.

Basel ll Basel I2009 2008

£m £m

Total qualifying Tier 1 capital 49,722 37,101

Total qualifying Tier 2 capital 14,620 22,356

Total deductions (880) (964)

Total net capital resources 63,462 58,493



53 Segmental reportingThe following section analyses the Group’s performance by business. For management reporting purposes during 2009, Barclays was organised into the following business groupings:

Global Retail and Commercial Banking– UK Retail Banking

– Barclays Commercial Bank

– Barclaycard

– GRCB – Western Europe

– GRCB – Emerging Markets

– GRCB – Absa

Investment Banking and Investment Management– Barclays Capital

– Barclays Global Investors

– Barclays Wealth

Head Office Functions and Other Operations

UK Retail Banking UK Retail Banking comprises Personal Customers, Home Finance, Local Business, Consumer Lending and Barclays Financial Planning. This cluster ofbusinesses aims to build broader and deeper relationships with its Personal and Local Business customers through providing a wide range of products andfinancial services. Personal Customers and Home Finance provide access to current account and savings products, Woolwich branded mortgages andgeneral insurance. Consumer Lending provides unsecured loan and protection products and Barclays Financial Planning provides investment advice andproducts. Local Business provides banking services, including money transmission, to small businesses.

Barclays Commercial BankBarclays Commercial Bank provides banking services to organisations with an annual turnover of more than £1m. Customers are served via a network of relationship and industry sector specialists, which provides solutions constructed from a comprehensive suite of banking products, support, expertiseand services, including specialist asset financing and leasing facilities. Customers are also offered access to the products and expertise of other businessesin the Group, particularly Barclays Capital, Barclaycard and Barclays Wealth.

BarclaycardBarclaycard is a multi-brand credit card and consumer lending business which also processes card payments for retailers and merchants and issues creditand charge cards to corporate customers and the UK Government. It is one of Europe’s leading credit card businesses and has an increasing presence in theUnited States and South Africa.

In the UK, Barclaycard comprises Barclaycard UK Cards, Barclaycard Partnerships, Barclays Partner Finance and FirstPlus.

Outside the UK, Barclaycard provides credit cards in the United States, Germany, South Africa (through management of the Absa credit card portfolio) andin the Scandinavian region, where Barclaycard operates through Entercard, a joint venture with Swedbank.

Barclaycard works closely with other parts of the Group, including UK Retail Banking, Barclays Commercial Bank and GRCB – Western Europe and GRCB –Emerging Markets, to leverage their distribution capabilities.

Global Retail and Commercial Banking – Western EuropeGRCB – Western Europe encompasses Barclays Global Retail and Commercial Banking as well as Barclaycard operations in Spain, Italy, Portugal, France andRussia. GRCB – Western Europe serves customers through a variety of distribution channels. GRCB – Western Europe provides a variety of productsincluding retail mortgages, current and deposit accounts, commercial lending, unsecured lending, credit cards, investments, and insurance serving theneeds of Barclays retail, mass affluent, and corporate customers.

Global Retail and Commercial Banking – Emerging Markets GRCB – Emerging Markets serves retail and commercial banking customers in Botswana, Egypt, Ghana, India, Kenya, Mauritius, Pakistan, Seychelles,Tanzania, Uganda, the UAE, Zambia, Indonesia and Zimbabwe. Through a network of more than 683 distribution points and 1,023 ATMs, we provide 3.7 million customers and clients with a full range of products and services. This includes current accounts, savings, investments, mortgages and securedand unsecured lending.

Global Retail and Commercial Banking – Absa GRCB – Absa represents Barclays consolidation of Absa, excluding Absa Capital, Absa Card and Absa Wealth which is included as part of Barclays Capital,Barclaycard and Barclays Wealth respectively. Absa Group Limited is a South African financial services organisation serving personal, commercial andcorporate customers predominantly in South Africa. GRCB – Absa serves retail customers through a variety of distribution channels and offers a full range ofbanking services, including current and deposit accounts, mortgages, instalment finance, credit cards, bancassurance products and wealth managementservices. It also offers customised business solutions for commercial and large corporate customers.


53 Segmental reporting continuedBarclays CapitalBarclays Capital is the investment banking division of Barclays that provides large corporate, institutional and government clients with solutions to theirfinancing and risk management needs.

Barclays Capital services a wide variety of client needs, covering strategic advisory and M&A; equity and fixed income capital raising and corporate lending;and risk management across foreign exchange, interest rates, equities and commodities.

Activities are organised into three principal areas: Global Markets, which includes commodities, credit products, equities, foreign exchange, interest rateproducts; Investment Banking, which includes corporate advisory, Mergers and Acquisitions, equity and fixed-income capital raising and corporate lending;and Private Equity and Principal Investments. Barclays Capital includes Absa Capital, the investment banking business of Absa. Barclays Capital worksclosely with all other parts of the Group to leverage synergies from client relationships and product capabilities.

Barclays Global InvestorsThe majority of the BGI business, which was previously reported as a separate business segment, was sold on 1st December 2009 to BlackRock, Inc. andrepresents the Group’s discontinued operations. The continuing operations of BGI disclosed in the segmental analysis represent residual obligations underthe cash support arrangements and associated liquidity support charges and, from 1st December 2009, include the Group’s 19.9% ongoing interest inBlackRock, Inc. This investment is accounted for as an available for sale equity investment, with no dividends being received during 2009.

Barclays WealthBarclays Wealth focuses on private and intermediary clients worldwide providing international and private banking, fiduciary services, investmentmanagement, and brokerage.

Barclays Wealth works closely with all other parts of the Group to leverage synergies from client relationships and product capabilities.

Head Office Functions and Other OperationsHead Office Functions and Other Operations comprises head office and central support functions, businesses in transition and inter-segment adjustments.

Head office and central support functions comprises the following areas: Executive Management, Finance, Treasury, Corporate Affairs, Human Resources,Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property, Tax, Compliance and Risk. Costs incurred wholly on behalf of the businessesare recharged to them.

Businesses in transition principally relate to certain lending portfolios that are centrally managed with the objective of maximising recovery from the assets.



53 Segmental reporting continued

As at Head office31st December UK Barclays GRCB – GRCB – Barclays functions Total

2009 Retail Commercial Barclay- Western Emerging GRCB – Barclays Global Barclays and other ContinuingBanking Bank card Europe Markets Absa Capital Investorsa Wealth operations Operations

£m £m £m £m £m £m £m £m £m £m £m

Interest income from external customers 2,421 1,568 2,573 1,083 765 1,385 1,002 (37) 470 439 11,669Other income from external customers 1,550 1,096 1,456 640 280 1,166 10,097 76 966 98 17,425

Income from external customers, net of insurance claims 3,971 2,664 4,029 1,723 1,045 2,551 11,099 39 1,436 537 29,094Inter-segment income 14 89 13 – – (2) 526 1 (103) (538) –

Total income net of insurance claims 3,985 2,753 4,042 1,723 1,045 2,549 11,625 40 1,333 (1) 29,094Impairment charges and other credit provisions (936) (974) (1,798) (667) (471) (567) (2,591) – (51) (16) (8,071)Segment expenses – external (2,187) (838) (1,440) (1,318) (934) (1,743) (6,559) 2 (1,015) (680) (16,712)Inter-segment expenses (253) (192) (54) 205 82 274 (33) (19) (123) 113 –

Total expenses (2,440) (1,030) (1,494) (1,113) (852) (1,469) (6,592) (17) (1,138) (567) (16,712)Share of post-tax results of associates and joint ventures 3 – 8 4 – (4) 22 – – 1 34Profit on disposal of subsidiaries, associates and joint ventures – – 3 157 24 (3) – (1) 1 7 188Gains on acquisitions – – – 26 – – – – – – 26

Business segment profit before tax 612 749 761 130 (254) 506 2,464 22 145 (576) 4,559

Additional informationDepreciation and amortisation 146 69 133 110 77 143 452 – 51 25 1,206Impairment loss – intangible assets 4 1 17 1 1 2 – – – 1 27Impairment of goodwill – 1 – – – – – – – – 1Investments in associates and joint ventures 2 (1) (5) 88 – 34 170 – – 134 422

Total assets 105,344 75,605 30,286 64,200 11,889 45,846 1,019,259 5,404 15,146 6,169 1,379,148Total liabilities 102,934 68,108 5,543 48,049 9,836 25,769 951,192 416 41,648 66,954 1,320,449

Notea The discontinued operations of the Barclays Global Investors business are disclosed in Note 39.


53 Segmental reporting continued

As at 31st December 2008 Head OfficeUK Barclays GRCB – GRCB – Barclays Functions

Retail Commer- Western Emerging GRCB – Barclays Global Barclays and OtherBanking cial Bank Barclaycard Europeb Marketsb Absa Capital Investorsa Wealth Operations Total

£m £m £m £m £m £m £m £m £m £m £m

Interest income from external customers 2,816 1,589 1,677 831 621 1,223 2,026 (52) 496 188 11,415Other income from external customers 1,702 1,068 1,492 627 373 946 2,989 (26) 914 (347) 9,738

Income from external customers, net of insurance claims 4,518 2,657 3,169 1,458 994 2,169 5,015 (78) 1,410 (159) 21,153Inter-segment income (36) 88 50 (3) – 29 216 6 (86) (264) –

Total income net of insurance claims 4,482 2,745 3,219 1,455 994 2,198 5,231 (72) 1,324 (423) 21,153

Impairment charges and other credit provisions (602) (414) (1,097) (297) (165) (347) (2,423) – (44) (30) (5,419)Segment expenses – external (2,138) (934) (1,405) (1,139) (825) (1,576) (3,789) (256) (809) (516) (13,387)Inter-segment expenses (381) (129) (17) 179 137 271 15 (18) (126) 69 –

Total expenses (2,519) (1,063) (1,422) (960) (688) (1,305) (3,774) (274) (935) (447) (13,387)

Share of post-tax results of associates andjoint ventures 8 (2) (3) – – 5 6 – – – 14Profit on disposal of subsidiaries, associates and joint ventures – – – – – 1 – – 326 – 327Gain on acquisition – – 92 52 – – 2,262 – – – 2,406

Business segment profit before tax 1,369 1,266 789 250 141 552 1,302 (346) 671 (900) 5,094

Additional informationDepreciation and amortisation 111 69 114 75 52 117 272 1 40 31 882Impairment loss – intangible assets – – – – – – – – (3) – (3)Impairment of goodwill – – 37 – – – 74 1 – – 112Investments in associates and joint ventures 1 (3) (13) – – 84 150 – – 122 341

Total assets 101,422 84,038 30,930 65,521 13,870 40,397 1,629,126 71,342 13,280 3,103 2,053,029Total liabilities 104,640 64,997 3,004 37,632 10,135 20,720 1,603,093 68,372 45,846 51,016 2,009,455

Notea The discontinued operations of the Barclays Global Investors business are disclosed in Note 39.b Figures have been restated for Barclays Russia, which was transferred from GRCB – Emerging Markets to

GRCB – Western Europe during 2009.



53 Segmental reporting continuedRevenue by products and servicesDetails of revenue from external customers by product or service are disclosed in Notes 2 to 6 on pages 40 to 42.

Geographical information(i) A geographical analysis of revenues from external customers is presented below:

2009 2008£m £m`

Continuing operationsAttributed to the UK 12,821 11,912Other European Union 4,397 3,514United States 5,547 (471)South Africa 2,980 2,618Other Africa 917 1,015Rest of the World 2,432 2,565

Total 29,094 21,153

Discontinued operationsAttributed to the UK 432 319Other European Union 100 119United States 1,084 1,181Rest of the World 247 297

There are no individual countries included in Other European Union, Other Africa and Rest of the World contributing more than 5% of income from externalcustomers.

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